Nam Cheong Limited’s share price was up about 15% since our initiation report (“Dominant M’sian OSV Builder”, 20/11/2012) less than two months ago. Last month, it sold one Platform Support Vessel (PSV) and two Anchor Handling Towing Supply (AHTS) vessels worth a combined US$56.4m, bringing its total number of vessel sold in 2012 to a record high of 21 (2011: 13 vessels). We believe this strong momentum will continue as Petronas catches up on its projected expenditures in the Malaysian oil and gas space. Meanwhile, as we adjust our model to take into account for the recent sales, our fair value estimate for the counter edges up to S$0.30 (previously S$0.28), still on 8x FY13F EPS. Maintain BUY
Up 15% in less than two months
Nam Cheong Limited’s share price was up about 15% since our initiation report (“Dominant M’sian OSV Builder”, 20/11/2012) less than two months ago. Coming into 2013, we believe the stock will continue perform well as the group rides on the strong momentum of vessel sales and the robust dynamics in Malaysian oil and gas space.
Record number of vessel sales
Last month, Nam Cheong sold one Platform Support Vessel (PSV) and two Anchor Handling Towing Supply (AHTS) vessels worth a combined US$56.4m, bringing its total number of vessels sold in 2012 to a record 21 (2011: 13 vessels). The PSV was sold to a new customer, a major marine services provider in the Asia offshore industry, while the two AHTS were to a repeat customer – Icon Offshore Berhad, one of Malaysia’s largest OSV groups. All three vessels are part of Nam Cheong’s build-to-stock programme and are scheduled for delivery by 2Q13.
Malaysia’s robust oil and gas industry
We expect the oil and gas industry in Malaysia to be strong over the near-term horizon. In 2011, Petronas announced that it will invest RM300b over the next five years (or an average of RM60b per year), compared only RM150b over the previous five years. With the expected increase in offshore spending, we believe Nam Cheong will benefit from higher demand for offshore vessels.
Well-positioned for 2013
Out of the 19 vessels under its 2013 build-to-stock programme, Nam Cheong has already sold nine last year, with the majority going to overseas buyers. As Petronas catches up on its projected expenditures, we believe there will be more order flow for Malaysian offshore players in 2013-14. Meanwhile, as we adjust our model to take into account for the recent sales, our fair value estimate for the counter edges up to S$0.30 (previously S$0.28). Maintain BUY.
Nam Cheong Limited’s share price was up about 15% since our initiation report (“Dominant M’sian OSV Builder”, 20/11/2012) less than two months ago. Coming into 2013, we believe the stock will continue perform well as the group rides on the strong momentum of vessel sales and the robust dynamics in Malaysian oil and gas space.
Record number of vessel sales
Last month, Nam Cheong sold one Platform Support Vessel (PSV) and two Anchor Handling Towing Supply (AHTS) vessels worth a combined US$56.4m, bringing its total number of vessels sold in 2012 to a record 21 (2011: 13 vessels). The PSV was sold to a new customer, a major marine services provider in the Asia offshore industry, while the two AHTS were to a repeat customer – Icon Offshore Berhad, one of Malaysia’s largest OSV groups. All three vessels are part of Nam Cheong’s build-to-stock programme and are scheduled for delivery by 2Q13.
Malaysia’s robust oil and gas industry
We expect the oil and gas industry in Malaysia to be strong over the near-term horizon. In 2011, Petronas announced that it will invest RM300b over the next five years (or an average of RM60b per year), compared only RM150b over the previous five years. With the expected increase in offshore spending, we believe Nam Cheong will benefit from higher demand for offshore vessels.
Well-positioned for 2013
Out of the 19 vessels under its 2013 build-to-stock programme, Nam Cheong has already sold nine last year, with the majority going to overseas buyers. As Petronas catches up on its projected expenditures, we believe there will be more order flow for Malaysian offshore players in 2013-14. Meanwhile, as we adjust our model to take into account for the recent sales, our fair value estimate for the counter edges up to S$0.30 (previously S$0.28). Maintain BUY.
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