Nam Cheong secured sale contracts for three vessels

Nam Cheong announced that it had secured sale contracts for three vessels - 2 AHTS and 1 PSV - for a total consideration of US$43.8m. These vessels are part of Nam Cheong's build-to-stock series models and are being built at one of its partner yards in China. With the sale of these 3 vessels, Nam Cheong's order book has expanded to RM912m, consisting of 15 vessels. Of the 12 vessels scheduled to be completed in 2H12 (6 were delivered in 1H12), we reckon only 1 AHTS vessel remains unsold as of now.

The total price tag is largely in line with our estimates, as it implies about US$12m for each AHTS and about US$20m for the PSV vessel. One of the 5,150 bhp AHTS vessels was sold to a repeat Norwegian customer, for deployment in Brazilian waters under a long-term contract with Petrobras. The same customer had earlier bought two similar vessels in March 2012. The other 5,150 bhp AHTS vessel was sold to another repeat customer based in the Middle East. The 3,000 dwt PSV was sold to a new customer - an emerging offshore services and construction company based in West Africa.

The sale of the PSV marks the penetration of a new offshore oil & gas market for Nam Cheong, and expands its future geographical scope. These sale contracts also further strengthen Nam Cheong's track record of being able to
sell its built-to-stock vessels well ahead of completion. As the vessel sales are within expectations for the year, no change to our earnings estimates. As highlighted earlier, Nam Cheong's earnings will be stronger in 2H12, as more vessels are delivered during this period. Maintain BUY with TP of S$0.24 for close to 30% earnings CAGR over FY11-13.