Nam Cheong

Nam Cheong: Announced a solid set of 3Q14 results which were ahead of street estimates, as net profit more than doubled to RM126.3m (+115%) taking 9M14 net profit to RM260.7m (+93%). Revenue jumped 81% to RM618.6m, led by the shipbuilding segment which saw revenue up 86% to RM595.1m, mainly contributed by the increase in order win in 3Q14 of 16 vessels as compared to seven vessels from the previous year. The vessel chartering segment also recorded a 9% increase in revenue to RM23.5m, resulting from the net increase of one new vessel to its chartering fleet. Overall gross margin was at 24.0% versus 25.5% from the previous year, as one of the vessels’ charter contract ended and was subsequently disposed of in 4Q14. Bottom-line was aided by a 34% drop in selling and admin expenses to RM14.9m, offset partly by an almost five-fold jump in finance expenses to RM7.5m due to the issuance of additional medium term notes in 3Q14. Going forward, Nam Cheong guides that despite the recent volatility in oil prices, the group is seasoned in weathering the downturns of the O&M industry, moreover the shallow water segment which it operates in, is often deemed as recession proof due to the lower cost of oil production versus the deepwater segment. The group still expects to see strong demand for AHTS vessels and other OSVs. Nam Cheong currently has an order book of ~RM1.9b, which stretches revenue visibility over the next two years. Net gearing stands at 48% and at the current price, the group trades at just 6.4x annualized 9M14 P/E.