Nam Cheong hoards S$110m in its medium term notes

Plus more order flows from Petronas link-up.

According to DBS, it visited Nam Cheong’s shipyard in Miri recently for the launch of Malaysia’s first diesel electric Multi-Purpose Platform Supply Vessel, commissioned by Malaysia’s leading OSV operator and Nam Cheong’s biggest customer, Bumi Armada.

Here's more from DBS:

The 4000 dwt vessel is the largest built by Nam Cheong in Malaysia to date, and is based on a fuel-efficient design by Wartsila. We noted good deck space and top notch equipment on board, which is Nam Cheong’s hallmark – to build quality vessels that can find employment even under the toughest conditions.

FY12 has been a record year for vessel sales. With the last set of four AHTS vessels sold in November, FY12 is already a record year for Nam Cheong with 18 vessels sold YTD.

It has now also sold nine of its 19 vessel build-to-stock programme for FY13, so the crystal ball has been working so far. Its order book was close to record level of RM1.3bn in November 2012, and should drive healthy earnings growth in FY13/14.

Growth should continue. We expect more order flows from Petronas-linked projects in Malaysia in 1H FY13, as activity on the ground picks up steam.

Nam Cheong recently raised about S$110m through MTN (medium term notes) to secure working capital to support growth. We believe its FY14 newbuild programme will be larger than in FY13, in line with the still robust outlook for oil & gas E&P activities.

And we remain comfortable with our projection of close to 30% earnings CAGR over FY11-13. Maintain BUY with TP of S$0.30, pegged to 9x FY13 earnings.

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