Nam Cheong could be looking at more order wins

Additional Petronas-linked contracts in the cards.

Here's more from DBS:

Nam Cheong on track for strong growth year. 3Q12 revenue was down 44% y-o-y to RM142m, and net profit was down 33% to RM31.6m, largely due to timing of revenue recognition on vessels sold. Though revenue was somewhat below our estimates – due to lower number of vessels delivered during the period – net profit was in line, boosted by better-than-expected gross margin of 27%, though this included about RM4m in forex gains. 9M12 net profit is up 31% y-o-y, and the group remains on track to achieving close to 30% earnings growth in FY12. 9M12 net profit of RM87.3m already makes up 71% of our full-year estimates.

Order win momentum continues. The group also reported sale contracts for 4 AHTS vessels worth US$45m to repeat customers in Norway, Singapore and a new customer in Indonesia. With this contract, Nam Cheong has now sold 9 out of its 19 vessel build-to-stock programme for FY13. FY12 is already a record year for Nam Cheong in terms of number of vessels sold (18 sold YTD). More order flows from Petronas-linked contracts in Malaysia could be expected in 1H-FY13, as activities pick up steam, according to management. 4Q12 earnings should be stronger, as a slew of sale contracts have been signed in the last few months for delivery in FY12-13. Revenue recognition should also be boosted by the scheduled delivery of at least 7 more vessels in 4Q12. Two vessels in the FY12 build-to-stock programme are unsold as of now.

Growth to sustain. Our earnings estimates for FY12/13/14 are adjusted up by 2-4%. Nam Cheong has recently raised about S$110m under its MTN programme to support working capital for growth. Management also hinted that the FY14 newbuilding programme is likely to be larger than that in FY13, in line with continuing robust outlook for oil & gas E&P activities. We will have more details of that in the coming months.

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