Company Name: NAM CHEONG LIMITED
| Research House: DMG | Price Call: BUY | Target Price: 0.29 |
DMG & Partners Securities initiated coverage of Singapore-listed Malaysian offshore vessel builder Nam Cheong with a ‘buy’ rating and a target price of $0.29.
Nam Cheong shares rose as much as 2.5% to $0.205 on Tuesday. The stock has surged around 58% so far this year, versus the 17% gain in the FT ST Small Cap Index.
Nam Cheong is the dominant offshore support vessel builder in Malaysia with a market share of 75% last year, DMG said, adding it expects the company’s net profit to double over the next two years on the back of strong vessel sales.
The broker said Nam Cheong offers a short time to delivery because of its build-to-stock model and the company is set to benefit from the higher capital expenditure of Malaysia’s state-owned oil and gas company Petronas.
Petronas has budgeted 300 billion ringgit ($120.7 billion) for capex over the next five years, an increase of 80% over the previous five, in response to its falling oil production, DMG said. “This provides a massive stimulus package to the entire Malaysian oil and gas industry.”
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