Maybank KE Report 23 Oct 13

Nam Cheong: Risk Taker Sees Rewards; Initiate BUY, TP $0.37             
                                                   NCL SP | Mkt Cap USD483m                                                        
                                                                           
  Ø  Initiate BUY and TP of SGD0.37, pegged to 9x PER on average FY13-15F 
  EPS. We see Nam Cheong benefiting from (1) a recovering Offshore Support 
  Vessel (OSV) market, (2) OSV replacement cycle, (3) Petronas’ Oil & Gas 
  capex and (4) its foresight in reading the supply-demand dynamics of the 
  sector.                                                                 
  Ø  Nam Cheong has demonstrated a strong ability to read market demand   
  with a track record of selling all build-to-stock vessels before         
  delivery. 2014 shipbuilding program is a big ramp-up over 2013 and it has
  already sold 57% of the 2014 vessels. Outstanding orderbook stands at   
  MYR1.7b. We expect the company to deliver 16% EPS CAGR over FY13-15F as 
  vessels in its ramped-up newbuild programs are readily absorbed by the   
  market.                                                                 
  Ø  At current share price, stock is trading at only 6.1x/6.6x FY14F/15F 
  PERs, inexpensive considering the robust growth prospects, higher ROEs   
  and shipbuilding margins. We also see possibility of higher dividend     
  payout in FY14F translating into a yield of about 5%.                   
                                                                           
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  yeakcheekeong@maybank-ke.com.sg