Nam Cheong

Nam Cheong: CS has an unrated report. House met We met with mgt post its 3Q12 results and note that Nam Cheong is the largest Msian-based OSV shipbuilder, delivering vessels from its own yard in Miri, Sarawak and three partner yards in Fujian, China. Nam Cheong has been operating a Build to Stock (BTS) model since 2006, where market research and feedback from key customers and industry players are used to forecast OSV demand, with construction of OSVs undertaken in advance of orders to minimise order-delivery lead times. Grp is expecting 18/19 vessel deliveries in 2012/2013 respectively under its shipbuilding programme. YTD orders secured for these vessels are at 16/9 vessels, respectively. Mgt reiterated that all previously built ships have been sold upon completion, since the inception of the BTS model. Nam Cheong is currently trading at 7.1x 2013E P/E, vs. the sector average of 8.1x, and a 2012 P/B of 1.8x against an expected ROE of 25.5%. We like to highlight that recent stocks which CS did an unrated report (e.g Sheng Siong & Cordlife) did experience some positive price momentum and do not rule out the same for Nam Cheong. Counter currently has a market cap of $449.6m, while some foreign houses have mandates of coverage on counters only with a market cap of > $500m.