4Q12 net profit almost doubled

Nam Cheong Limited reported a strong set of 4Q12 results with

revenue and net profit increasing by 172% YoY and 87% YoY to MYR

379m and MYR 49m respectively. On a full-year basis, revenue

climbed 45% to MYR 877m, while net profit increased 47% to MYR

137m. Operating margin declined slightly to 16.4% compared to

17.3% a year ago, partly due to lower margins from its vessel

chartering division. Several vessels were demobilized upon the charter

fulfillment and later re-deployed for ensuing contracts. The

shipbuilding business achieved significant growth with revenue

improving to MYR 839m (+49%) and gross profit increasing to MYR

164m (+56%). The group recommended a final dividend of 0.5 S cts

for FY12 (FY11: 0.2 S cts), representing a payout of 19.2%.

To deliver 25 vessels in FY14

Looking ahead, Nam Cheong expects to deliver 19 vessels in 2013

and 25 vessels in 2014, up from 13 in 2012. Of the 19 vessels in its

2013 shipbuilding programme, it has already secured firm orders for

13. Currently, the group has a gross order-book of MYR 1.3b,

including a Letter of Intent (LOI) from Bumi Armada for USD130m for

four units of Multi-Purpose Supply Vessels. Outlook for the Malaysian

offshore industry remains robust, underpinned by Petronas’ planned

capex of MYR 300b across 2011-15. Management continues to see

demand for small size AHTS vessels and PSVs, with the older vessels

to be replaced by newer ones with higher technical specifications.

New funds put to work

The group disclosed that it has already deployed half of its S$160m

new capital – raised from its recent MTN issuance and placement of

ordinary shares – into its 2013 shipbuilding programme. We expect

the remainder to be progressively utilized over the medium term. Net

gearing improved to 0.40x as at end-2012 (end-2011: 0.63x).

Maintain BUY with an unchanged fair value estimate of S$0.30.