Nam Cheong

Nam Cheong: Nam Cheong has sold two vessels worth ~US$45m, consisting of one AHTS to Netherlands-based repeat customer, Vroon, and one PSV to West Africa-based repeat customer, E.A Temile Development Company. Nam Cheong guides that despite the recent volatility in global oil prices which has affected investor sentiments across the industry, the securing of these orders from its repeat customers evidently reveals the continued interest in oil and gas activities, and the group’s strong reputation in the market for quality and reliable vessels. The order wins from foreign clients also suggest that Nam Cheong has broadened its customer base, which lowers its geographical concentration risks, and placing it in good stead to weather the fluctuations in oil prices. As a guide, shallow water projects (which are the focus area of Nam Cheong vessels) require oil prices to be at US$25 – US$50 per barrel in order to be profitable, while deepwater projects typically require prices to be as high as US$70 a barrel in order to breakeven. This provides a reasonable margin of safety to the group. The latest orders bring the group’s order book to ~RM1.7b, stretching revenue visibility over the next two to three years. At the current price, Nam Cheong trades at an undemanding 5.4x forward P/E.