Nam Cheong

Nam Cheong: UOB Kay Hian initiates coverage at BUY with $0.30 TP. House note that target price is pegged at 9.7x 2013F PE which is 1.3SD above peers’ long-term average PE of 7.0x - which deem justified given Nam Cheong’s dominant market share in a protected Msian market. See Nam Cheong as an attractive proxy to ride the Malaysian O&G upcycle, which is driven by Petronas's RM300b capex scheme to grow domestic oil production. In view, Nam Cheong will be first in line to benefit from rising domestic offshore activities which will lead to an upswing in demand for OSV newbuilds. Expect Nam Cheong's EPS to grow at a 3-year (2012-14) CAGR of 22%, driven by: a) Petronas's capex, b) Bumi Armada's ambitious “Steel on Water 2” fleet expansion programme, and c) an imminent shortage of PSVs in Asia as E&P activities move to deeper waters.