Nam Cheong

Nam Cheong: ($0.475) Strong visibility from robust order book Nam Cheong's 2Q14 net profit surged 55% to RM63.3m, on revenue of RM378.8m (+38%), buoyed by progressive recognition from vessel sales and higher contribution from chartering revenue on the addition of two new vessels. Gross margin slipped 1.9ppt to 17.7% mainly from a re-negotiation on an extended charter contract. The bottom line benefitted from a RM1.7m fair value gain from derivatives and FX gain of RM4.8m, as well as increased share of profit from jointly controlled entities due to asset deployment. This brought 1H14 net profit to RM134.4m (+76%) and revenue to RM786.1m (+54%), making up 53% and 43%, respectively, of street's full year estimates. Order book, as at 1 Jul 2014, remains robust at RM1.7b, providing clear visibility up to 2015. At $0.475, Nam Cheong trades at 9.9x forward P/E, in line with industry average. Bloomberg consensus has nine unanimous Buy ratings on the counter with consensus TP of $0.50.