Nam Cheong Limited reported a good set of 2Q14 results, with revenue jumping 37.6% YoY to MYR378.8m and PATMI soaring 55.4% to MYR63.3m. After adjusting for one-off gains amounting to MYR6.5m, results came in within our expectations. For 1H14, revenue and PATMI rose 54.1% and 75.7% to MYR786.1m and MYR134.4m, respectively. On a segmental basis, Nam Cheong’s shipbuilding revenue and gross profit grew 37.2% and 34.7% YoY in 2Q14, respectively, while vessel chartering revenue increased 44.3% but gross profit fell 26.9% due to the chartering-in of third party vessels.

Looking ahead, Nam Cheong remains upbeat on the oil and gas industry. It has secured order wins for 13 vessels worth approximately US$290m YTD, and its order book value stood at ~MYR1.7b, as at 1 Jul 2014. Given Nam Cheong’s 52.9% YTD share price appreciation, we place our BUY rating and S$0.445 fair value estimate under review pending an analyst briefing later.

Source: OCBC Research - 8 Aug 2014