Nam Cheong

Nam Cheong: UOB Kay Hian maintains Buy with $0.30 TP. Note that Nam Cheong is on track to meet house earnings forecast as it has already sold five out of eight built-to-stock (BTS) vessels forecasted in 2H12, amounting to RM318.7m. As the bulk of rev is recognised upon the sale of BTS vessels, expect robust 2H12 earnings on the back of strong vessel sales momentum. Forecast rev to grow 81.1% yoy and 23.9% yoy in 2012 and 2013 respectively, while net profit is expected to increase 46.9% yoy and 10.1% yoy in 2012 and 2013 respectively. Nam Cheong recently sold a PSV to a new customer in West Africa, expanding its customer base. Believe that this will reduce Nam Cheong’s dependence on a handful of large Malaysian vessel owners and mitigate customer concentration risk. See Nam Cheong as an undervalued proxy to Petronas’ Rm300b 5-yr capex plan to stem a decline in domestic oil production. Under this scheme, the national oil company will invest RM50b-55b annually over the next five yrs, 35-50% higher than the 5-year average for 2007-11. Believe that Malaysian-based yards such as Nam Cheong will be the main beneficiaries due to a domestic cabotage rule limiting foreign competition.