Nam Cheong reported a 69% YoY fall in revenue to RM189.3m and close to a 100% fall in net profit to RM6,000 in 3Q15, compared to net profit of RM126.3m in 3Q14 and RM10.7m in 2Q15. This brings 9M15 net profit to RM50.0m, accounting for just 33% of our full year estimate. Results were below ours and the street’s expectations.

With this disappointing set of results, we will look to revise our estimates lower. Though Nam Cheong’s share price has corrected ~50% since our downgrade to Sell in mid-May, and is now below our earlier fair value estimate of S$0.17, we think there could be more downside ahead due to lacklustre earnings and a weak outlook that would affect vessel values. Maintain SELL with S$0.17 fair value estimate under review.

Source: OCBC Research - 13 Nov 2015