Very strong 9M result incoming. We expect Nam Cheong to report RM30m-34m of profits this quarter, bringing 9M12 profits to RM86m-90m, about 30% higher than 9M11's RM66.8m. YoY, 3Q12 will be below 3Q11's RM46.8m as Nam Cheong sold five vessels in this quarter compared to eight vessels in the same period last year.

Already exceeded FY11 profits in Oct 2012. When Nam Cheong sold two PSVs early last month, it immediately leapfrogged FY11 profits of RM93m, as we expect the two vessels to contribute a total of at least RM20m in profits based on percentage of completion. Today, Nam Cheong is already sitting on more than RM110m in profits, already beating FY11 profits by at least 20% before the year is out.

The S$110m question. Nam Cheong raised S$110m in bonds last month, drawing upon its newly-established S$200m multi-currency medium term note programme. This was a surprise ' we had not expected fund-raising this quickly as its Chinese supplier yards were happy to take on a greater share of financing. This leads us to consider two non-mutually-exclusive possibilities: (i) An increase in the shipbuilding programme for FY14F beyond our original projections, and/or; (ii) Acquisition of business assets. Either would provide further upside to future earnings.

Still very cheap. Nam Cheong is trading at only 6.6x FY13F EPS, a very low multiple for a company growing at 30% a year. Results will be released next Monday morning.

Source: OSK