Nam Cheong Limited recently announced that its Executive Director, Mr. Leong Seng Keat, has been re-designated as the CEO. Mr. Leong, also the son-in-law of ex-CEO Datuk Tiong Su Kouk, has been with the group since 2005. We expect the leadership transition to be smooth. Meanwhile, we continue to like Nam Cheong for its market leadership in the increasingly active Malaysia oil & gas industry. Having seen a healthy pick-up in order wins, Nam Cheong recently expanded its shipbuilding programme to 28 vessels for FY14F (FY13: 19 vessels). Its large order-book of MYR1.3b, for 26 vessels delivered over FY13-15F, helps to mitigate its risk by providing a base level of earnings. Maintain BUY with a higher FV of S$0.35 (previously S$0.30).
New CEO; but expect a smooth transition
Nam Cheong Limited recently announced that its Executive Director, Mr. Leong Seng Keat, has been re-designated as the CEO. Datuk Tiong Su Kouk, who is also a controlling shareholder with a 43% stake, will relinquish his CEO position but he remains as the Executive Chairman. We believe that this leadership transition would be smooth and do not expect any significant changes to the group’s business directions. Mr. Leong, also the son-in-law of Datuk Tiong, joined Nam Cheong in 2005 after 15 years in the IT industry. With his sales and management experience, Mr. Leong successfully marketed the group’s vessels to the international market.
Strong market leadership
We continue to like Nam Cheong for its market leadership in Malaysia. Having fine-tuned its outsourcing strategy over the years, the group now dominates the OSV market with about 70% domestic market share. Although majority of its vessels are built in third-party Chinese yards, the group has supervising teams on the ground to ensure that the vessels are of sound quality. This outsourcing strategy allows Nam Cheong to scale up its production capability quickly without having to incur hefty capital expenditures.
Pick-up in OSV demand expected
Petronas had pledged to spend RM300b in capital expenditure over 2011-15, 80% more than the previous 5-year period. We believe this will likely result in increased investments across the Malaysian offshore oil & gas industry. Already, Nam Cheong is seeing a healthy pick-up in order wins (FY11: 13 vessels; FY12: 21 vessels) and it has recently expanded its shipbuilding programme to 28 vessels for FY14F (FY13: 19 vessels). Its large order-book of MYR1.3b, for 26 vessels delivered over FY13-15F, helps to mitigate its risk by providing a base level of earnings. Given the strong growth profile, we find current valuation (FY13F PER of 8.6x) attractive. We now raise our FV to S$0.35 (previously S$0.30) on a higher PER of 11x. MaintainBUY.
Nam Cheong Limited recently announced that its Executive Director, Mr. Leong Seng Keat, has been re-designated as the CEO. Datuk Tiong Su Kouk, who is also a controlling shareholder with a 43% stake, will relinquish his CEO position but he remains as the Executive Chairman. We believe that this leadership transition would be smooth and do not expect any significant changes to the group’s business directions. Mr. Leong, also the son-in-law of Datuk Tiong, joined Nam Cheong in 2005 after 15 years in the IT industry. With his sales and management experience, Mr. Leong successfully marketed the group’s vessels to the international market.
Strong market leadership
We continue to like Nam Cheong for its market leadership in Malaysia. Having fine-tuned its outsourcing strategy over the years, the group now dominates the OSV market with about 70% domestic market share. Although majority of its vessels are built in third-party Chinese yards, the group has supervising teams on the ground to ensure that the vessels are of sound quality. This outsourcing strategy allows Nam Cheong to scale up its production capability quickly without having to incur hefty capital expenditures.
Pick-up in OSV demand expected
Petronas had pledged to spend RM300b in capital expenditure over 2011-15, 80% more than the previous 5-year period. We believe this will likely result in increased investments across the Malaysian offshore oil & gas industry. Already, Nam Cheong is seeing a healthy pick-up in order wins (FY11: 13 vessels; FY12: 21 vessels) and it has recently expanded its shipbuilding programme to 28 vessels for FY14F (FY13: 19 vessels). Its large order-book of MYR1.3b, for 26 vessels delivered over FY13-15F, helps to mitigate its risk by providing a base level of earnings. Given the strong growth profile, we find current valuation (FY13F PER of 8.6x) attractive. We now raise our FV to S$0.35 (previously S$0.30) on a higher PER of 11x. MaintainBUY.
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