Nam Cheong eyeing Indonesia's lucrative charter market

To propel its high-margin charter income.

OSK-DMG noted that Nam Cheong has entered into a JV with PT Bahtera Niaga Internasional to own and operate OSVs in the lucrative Indonesian market.

"This will boost its high-margin recurring charter income, thus providing a new source of orders and shipbuilding profits," said OSK-DMG, explaining that the JV will allow NCL to charter vessels in Indonesia, where the enforcement of cabotage law has led to charter rates spiking up 33% last year.

"We calculate that a 5,150bhp anchor handling tug supply (AHTS) vessel in Indonesia today can fetch net margins of 41% net margins. At 30% equity financing, the ROE on each vessel is 44%," it added.

OSK-DMG also assumes that this JV will own the smaller 5,150bhp AHTS vessels as well as a low growth
rate of three vessels per year starting from FY14F, relative to NCL’s large building capability, given that capital is the main constraint for Indonesian partners of OSV JVs.