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Nam Cheong And OSIM: More Upside Potential To Come?
Tradeable, Tradeable Ideas | 29 January 2014
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By: Justin Harper
Articles (23) Profile

Nam Cheong recently announced more contract wins while OSIM reported a record earnings year, thus we decide to take a peek into how these counters will perform in the future.

Nam Cheong Could Be A Slick Buy
Offshore marine group Nam Cheong announced this week that it has clinched contracts worth a total of US$70 million for the sale of four units of emergency response and rescue vessels (ERRVs) and one unit of anchor handling towing supply (AHTS) vessel.

The ERRVs are constructed under Nam Cheong’s build-to-order model, while the AHTS is constructed under its build-to-stock model. These five vessels were sold to Nam Cheong’s existing customer, Sentinel Marine, with the deliveries scheduled to take place in 2015 and 2016. Nam Cheong also secured US$66 million worth of orders at the end of 2013.

Oversea Chinese Banking Corporation believes this highlights the buoyant prospects in the offshore support vessel sector. It maintains its “Buy” rating on the stock with a $0.37 fair value for the share price. While DBS Vickers also maintains its “Buy” call, and has revised up its target price from $0.36 to $0.42. The average upside potential among analysts is for a 15.6 percent rise in the share price.

Getting Comfy With OSIM
Lifestyle products firm OSIM’s FY13 results came within expectations with recurring net profit up 16 per cent year-on-year to $101.6 million. This was a fifth record year for OSIM, while 4Q13 was a record quarter in terms of revenue and net profit.

This left the firm ending the year with a tidy cash pile of $229 million. However, the dividend for the full-year was unchanged at $0.06.

Maybank Kim Eng expects profit growth to further strengthen in FY14 as the company consolidates tea maker TWG, which should be another source of growth. TWG should be contributing around 10 percent of group revenue currently, increasing to 20 percent by FY16.

OSIM saw higher growth coming from South Asia compared with North Asia, and also rationalised its store network in China by opening 24 outlets and closing 30 outlets. Thanks to a successful marketing campaign in 2H13, sales in China picked up in 4Q13 with a 13 percent year-on-year growth in North Asia.

Also on OSIM’s side is its successful strategy of riding on celebrity appeal and multiple product price points which are helping it capture existing and new opportunities from the growing wealth in the region. It has also introduced tier pricing for different market segments, from its lower-priced uAngel at $1,888 to uInfinity at $6,988.

OSK DMG has lifted its forecast FY14 earnings by four percent to $116 million and has estimated FY15 earnings of $133m.

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Justin Harper is an experienced financial journalist who previously worked on the business desks of the Daily Mail, The Telegraph and Financial Times Business in London.

Please click here for more information about this author.

Nam Cheong  0.006 -0.002 -25.00%   
Business: An offshore marine group specialising in the building of offshore support vessels. [FY18 Turnover] Shipbuilding (59.2%), vessel chartering (40.8%).

Insight: May-19, 1Q19 revenue jumped multiple times to RM29... Read More

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