• Record revenue and earnings
• Positive prospects
• Raise FV and reiterate BUY

Record results delivered

Nam Cheong Limited reported 4Q13 revenue of MYR406.2m, representing a YoY increase of 7.1%. PATMI jumped 42.8% to MY70.5m, such that FY13 revenue and PATMI grew by 43.5% and 50.6% to MYR1,257.5m and MYR205.6m, respectively. This was a record high for the group. The latter exceeded our FY13 forecast by 9.8%. This was partly due to a one-off reversal of deferred tax, excluding which Nam Cheong’s FY13 profit before tax (PBT) of MYR199.2m (+43.8%) would have been 2.0% above our PBT forecast. A special dividend of 0.5 S cent/share was declared, on top of a first and final dividend of 0.5 S cent/share, bringing total FY13 DPS to 1 S cent, and translates into a yield of 2.9%.

Guidance on 35 vessels for FY15 shipbuilding programme

Nam Cheong saw record order wins of 24 vessels in FY13 which amounted to ~US$500m, surpassing its 2012 record order win of 21 vessels. 20 vessels were delivered to its customers in 2013. Its order book value stood at MYR1.5b, as at 26 Feb 2014, of which MYR1.4b remains unrecognised. Management guided that it is targeting to deliver 35 vessels worth a total of US$700m in FY15, ahead of our estimate for 32 vessel deliveries. This was also higher than FY14’s target of 30 vessels with an aggregate value of US$600m.

Maintain BUY

Looking ahead, we expect Nam Cheong to be a key beneficiary of Petronas’ aggressive capex plans; while the global replacement cycle of aging OSV fleet will also aid Nam Cheong’s order wins momentum. We lift our target PER peg from 8.5x to 9.5x in recognition of Nam Cheong’s solid execution track record and robust industry outlook. Applying this to our FY14F EPS estimate which has also been raised by 4.9%, we derive a higher fair value estimate of S$0.42 (previously S$0.37). Maintain BUY on Nam Cheong, which remains as one of our top picks within the oil and gas sector.

Source: OCBC Research - 27 Feb 2014