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Despite Recent Selldown, Why Is Nam Cheong Still A Market Favourite?
Tradeable, Tradeable Ideas | 02 October 2014
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By: Raymond Leung
Articles (142) Profile
  1. Nam Cheong recently announced plans to take up a 30 percent stake in an Indonesian company. This deal is expected to be priced at USD$30.7 million and will be Nam Cheong’s second foray into the Indonesian market.
  2. Nam Cheong’s share price has taken a beating since the fall in oil prices. This comes despite the expectation of a very good 3Q14 financial result.
  3. The dip in share price could offer an entry price for investors who are on the sidelines due to high valuations.

Seemingly hit by concerns about falling oil prices, Nam Cheong’s shares have come off from highs attained in August. Although a largely speculative ship builder, Nam Cheong has been pushing through some very good sales figures. Is it time to buy on dips?

Analysts updates on Nam Cheong

Nam Cheong’s (NCL) shares fell 13 percent in recent weeks as weak oil prices hit the offshore and marine sector in Singapore. This came despite the positive developments in the company and the expectation of a blistering 3Q14 financial result.

Recently, NCL announced its plans to take up a 30 percent stake in PT Bina Buana Raya (BBR), an associate company of Marco Polo Marine. The deal is valued at USD 30.7 million and is priced at book value.

This acquisition will allow NCL to have more exposure to the more lucrative Indonesian market and a way for efficient diversification from the increasingly dwindling Malaysian market.

Earlier this year, the CEO of Petronas gave a warning about the oversupply for chartering in the offshore segment in Malaysia.

BBR will be utilizing part of the funds from the NCL acquisition to purchase five OSVs from NCL. The group has also secured sales for three anchor handling tug and supply (AHTS) vessels worth USD41 million from repeat customers.

For FY2014, NCL sold 25 vessels year to date (YTD) that is worth an estimated MYR 1.62 billion. This has already passed the 2013 year end record of 24 vessels with a total value of MYR 1.56 billion.

Nam Cheong has already sold 25 vessels this year and is poised to better FY13's performance by a large margin.

Analysts from OSK-DMG Research reiterated their “Buy” call towards NCL with a potential upside of 33.3 percent. This is in view of the record high sales and the belief that sales momentum will continue with a forecast of sale of 31 vessels for FY14.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.

Nam Cheong  0.008 -- --   
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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