Nam Cheong

Nam Cheong: DBSV starts Nam Cheong at Buy with a $0.24 TP, noting it's the largest OSV shipbuilder in Malaysia and it is poised to benefit from Petronas increasing its capex budget to MYR300b over the next five years. Existing cabotage regulations in Malaysia and strong relationships with owners/ charterers put it in a strong position to supply OSVs for future projects in Asian waters. With its build-to-stock model, Nam Cheong caters to the demand for urgent vessel requirements from owners, and is thus able to extract better shipbuilding margins than peers. House notes a current orderbook of MYR628m with management expecting increasing demand. Add that given its asset light structure, Nam Cheong should be able to generate very healthy ROE of 24%, and project 30% FY11-13F earnings CAGR is also better than peers. The stock is up 4.3% at $0.17.