Nam Cheong

Nam Cheong: OCBC reckons sales momentum is likely to slow and downgraded the counter to HOLD, with TP of $0.38, pegged to 7x FY15E earnings. Last week, Petronas announced that it is looking to cut capital expenditure for new projects by 15-20% next year should oil prices remain low. Though Nam Cheong has enjoyed a more diversified customer profile over the years such that Malaysian customers accounted for only about 20-30% of YTD vessel sales, the fall in oil price is a global event and should impact all of Nam Cheong’s customers. Moreover, should an industry downturn be worse than expected, the group would face higher risks on margins and even the possibility of unsold vessels. Order cancellation risk for its RM1.4b order book look low for now, but with the broader industry slowdown and sector de-rating, house deems it necessary to lower its P/E range for the O&M sector.