Thursday, February 21, 2013

Nam Cheong

Nam Cheong: DMG recommend investors buy into Nam Cheong before the grp reports its strongest ever results next Monday. House note that Nam Cheong Sold 9 vessels in 4Q12, out of 21 for Fy12. Remember that Nam Cheong recognizes all rev on work completed up to the point of sale immediately, thereafter following percentage-of-completion, and this sets Nam Cheong up for the strongest-ever financial performance. Add that 3Q12 saw shipbuilding gross margins at 25%, a sharp rise from the 15%-18% of the first two qtrs. These high-margin works will continue in 4Q, and house raise full-year building margin expectation to 18.4%, which increases FY12F bottom line to RM138m from RM132m. Conclude that at 7.8x PE valuations is compelling, for largest OSV builder in the Eastern Hemisphere, capturing almost the entire Malaysian market, and being a major beneficiary of Petronas’ surging capital expenditure budget. House continue to value Nam Cheong at 10x FY13F EPS for a TP of $0.33.

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