Monday, June 2, 2014
Nam Cheong
Nam Cheong: CLSA maintains its Buy call and raise its TP to $0.46, driven mainly by higher shipbuilding margins. The house notes that OSV supply-demand fundamentals are still strong which will continue to drive order growth for the shipbuilding segment and at the same time, the house believe that the company can significantly expand its chartering business which in turn will lead to more diversified and stable earnings profile.
Nam Cheong is currently trading at 7.5x FY14 and 6.4x FY15 earnings which implies a 20% discount to Singapore small/mid cap offshore names and is almost half the valuation of Malaysian OSV peers although company’s FY13-15 earnings cagr as well as ROE is superior to peer group.
While inherent risk in the company’s ‘build to stock’ model implies that it will trade at a discount to owner/operators, believe that improving liquidity coupled with strong earnings momentum and increase in chartering business could propel the stock to 8.3x FY15 P/E.
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