Towards Financial Freedom
Nam Cheong - Best Ever Quarter Coming Right Up
NCL will announce its 3Q13 results next Tuesday morning. We expect earnings to surge 60% y-o-y and 24% q-o-q to MYR50m for the company's best ever quarter. This will be largely contributed by healthy vessel sales in 3Q and a record orderbook that provides a high base for revenue recognition. These results and stronger guidance should take the stock to new heights. Reiterate BUY, with a SGD0.39 TP.
- Record orderbook and robust vessel sales. Nam Cheong (NCL) has a MYR1.7bn-strong orderbook, which provides a growing base of revenue recognition every quarter. It has sold 20 vessels YTD, just one vessel shy of matching last year's record.
- Quarterly bottomline to set new record. We expect the company to report 3Q earnings at least MYR50m, setting a new quarterly profit record. This will take the company's 9M13 earnings to MYR127m, thus meeting 69% of our FY13F estimate. All said, we also expect NCL to end the year with a similarly strong 4Q.
- Street needs to raise estimates. Street expectations of NCL's FY13F results range from MYR162m-188m and averages MYR173.6m. We see likely upgrades on those figures, albeit at the lower end of the range.
- Results, stronger guidance may take shares to new high. NCL shares have not moved much over the last half-year although the company has continued to build value through selling more vessels. We believe that the upcoming set of results will be a strong catalyst to spark a rally in its share price to new heights. Its management's positive guidance might also be support the stock's price appreciation.
- Accumulate ahead of results. Maintain BUY, with a SGD0.39 TP. NCL is one of our Top Picks for this sector, as it combines strong growth and a high ROE, for a low 7-8x P/E. Our SGD0.39 TP is based on 10x blended FY13F/14F EPS. As we believe that the upcoming quarters' operating outperformance has not been priced in, investors should accumulate ahead of the announcement of NCL's results.
Note: NCL only has one vessel remaining in its shipbuilding programme that is due for delivery this year. We believe the company is holding out on selling the vessel in order to secure a higher price for the last available short-lead-time asset.
Financial Exhibits
SWOT Analysis
Company Profile
Nam Cheong (NCL) is the largest OSV builder in the world, with a 10% share of the global shallow-water market. It specialises in building small-mid AHTS, PSVs and accommodation barges. It also operates a fleet of standby vessels.
Nam Cheong (NCL) is the largest OSV builder in the world, with a 10% share of the global shallow-water market. It specialises in building small-mid AHTS, PSVs and accommodation barges. It also operates a fleet of standby vessels.
Recommendation Chart
Source: OSK
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
