Nam Cheong reported a 49% YoY fall in revenue to RM192.7m and a 83% drop in net profit to RM10.7m in 2Q15, such that 1H15 net profit only accounted for 24% and 23% of ours and the street’s full year estimates, respectively. This was mainly due to a reduction in shipbuilding revenue because of lower progressive recognition of revenue from the sale of PSVs.

Vessel chartering revenue also fell 42% to RM13.5m in 2Q 2015, mainly due to lower utilisation rates. Nam Cheong’s share price has lost about 40% of its value since we downgraded our rating to SELL in mid May. But given the poor set of results, we maintain our SELL rating but put our fair value estimate of S$0.27 under review, pending an analyst briefing later.

Source: OCBC Research - 13 Aug 2015