Nam Cheong

Nam Cheong: CLSA has a CONVICTION BUY with a TP of $0.35 (implying 27% upside) for Nam Cheong. Following a series of meeting with OSV operators and shipyards in Malaysia, CLSA remain confident of its above-consensus forecasts. Petronas driven capex cycle in Malaysia will lead to sharp expansion in OSV fleet with potentially 40-50 vessels required over next 12-18 months and Nam Cheong will be a prime beneficiary as the largest local player. Outside Malaysia, OSV supply demand dynamics also seem to be improving with utilisation rates as well as day rates on a recovery trend. With limited incoming supply of AHTS and a sharp expansion in rig fleet, CLSA expect OSV demand to catch with supply over next 18 months, with Middle East, West Africa and Petrobras continuing to be key order drivers. Its 19 vessel deliveries in 2013 and 28 in 2014 will drive a 22% net profit CAGR growth over FY12-15. House roll forward its valuations to mid-FY14 and consequently, raises its target price to $0.35.