- To construct two 500-men AWBs worth USD84m for repeat customer Perdana Petroleum, with option to purchase another two.
- First-of-its-kind AWB in Malaysia and largest ever to be built by Nam Cheong. Orderbook now stands at MYR1.5b.
- To provide a combined EPS uplift of MYR1.5-1.7 sens over FY14E-16E. Maintain BUY, TP SGD0.45.
Nam Cheong has just sold two 500-men Accommodation Work Barges (AWBs) to repeat customer, Perdana Petroleum, for USD84m (~SGD105m/MYR273m), with an option to purchase another two. The AWBs would be constructed under the build-to-order (BTO) model with delivery scheduled for 2016. Orderbook for Nam Cheong now stands at MYR1.5b vs MYR1.4b as of end-March.
What’s Our View
The AWBs, which can accommodate up to 500 men, would be the first-of-its-kind in Malaysia when delivered. It is also the largest AWB ever to be constructed by Nam Cheong. Perdana Petroleum had previously ordered three other AWBs but those were of lower capacity of 300 men. In our view, this order not only demonstrates Nam Cheong shipbuilding capability but more importantly, it reflects its dominance in the Malaysian market with strong support from the domestic OSV players.
There is upside to our forecasts which do not incorporate any new BTO contracts. We estimate a total earnings uplift of MYR32-35m (EPS of MYR1.5-1.7 sen) over FY14E-16E. The bulk of the recognition should be in FY15E during the mid-construction phase based on an S-curve recognition profile.
Maintain BUY with TP of SGD0.45, which is pegged to 1.9x FY15E P/BV. Net profit forecasts to be reviewed.
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