DBS- Nam Cheong - Offshore support vessel upcycle firmly in

place, raise FY14/15 EPS estimates by 7-9%. Maintain BUY

with higher target price of S$0.46

According to the latest guidance from the management of

Nam Cheong, the FY14/15 work programmes consist of 30 and

35 vessels respectively, including built-to-order vessels. We

estimate the built-to-stock programme target for both FY14/15

is likely to be around 28 vessels worth about US$560-570m per

year, higher than our existing estimate of 25 vessels worth

about US$520m per year. The larger FY14/15 built-to-stock

programmes envisaged by Nam Cheong are testament to the

improving outlook for the OSV market. Buoyed by the

scheduled double-digit growth in offshore rig fleet over the

next two years, combined with declining orderbook-to-fleet

ratios, OSV demand supply dynamics look positive. Rising day

rates for PSVs and AHTS, combined with high proportion of

replacement demand for older fleet above 25 years of age, will

result in more near-term requirements for OSVs.

Margin execution for Nam Cheong is also better than expected

in FY13. We therefore raise our FY14/15 EPS estimates by 7-

Shares of Nam Cheong rallied into 52-wk high territory at the

turn of 2014 and held firm in spite of the recent market selldown,