Company Name: NAM CHEONG LIMITED
| Research House: UOB KayHian | Price Call: BUY | Target Price: 0.30 |
UOB KayHian keeps Nam Cheong (N4E.SG) at Buy with $0.30 target, based on 9.7x 2013 P/E, above peers’ 7.0X long-term mean, on its dominant 50%-75% market share in a high-barrier-to-entry market.
The house hosted a non-deal roadshow and among key takeaways, cites its proven track record, achieving profitability every year since its 2007 build-to-stock business model adoption, selling all BTS vessels before completion even during the financial crisis.
Management says it focuses on shallow water, mass-market products, as shallow-water E&P capex tends to be more stable and predictable vs deep-water spending, UOB-KH notes. It adds, customers find the BTS model attractive as they can indicate vessel requirements without a cash deposit during early construction stages, acting as a form of financing.
The company is also asset-light, subcontracting most vessels to Chinese yards, passing shipbuilding risks to the subcontractors, UOB-KH notes; Chinese yards’ generous payment terms allow it to be capital-light, it adds. UOB-KH says vessel sales can increase 60%-70% in 3-5 years.
The stock is up 9.8% at $0.225 in high volume of around 3.2% of shares changing hands on SGX.
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