Last price: S$0.74
Target Price: S$0.68
Kreuz reported 1Q13 numbers, which were in line with our expectation. Margins continued to improve, while the group also reported its seventh consecutive quarter of positive operating cash flow. Kreuz’s orderbook currently stands at US$200m, which will be recognised over 12-18 months. Even just based on this, we estimate that the group will be able to achieve 70-75% of our full-year revenue forecast. Management plans to charter in one additional third-party vessel on a 1+1 year contract, which will add capacity and allow the group to bid for additional contracts. Kreuz has an option with a Chinese shipyard for a second deepwater subsea construction vessel, which will probably be exercised in light of buoyant subsea activity. We maintain BUY with an unchanged target price of S$0.68, pegged to a 2014F PE of 6.5x. We see the potential to raise our target price now that the share price has exceeded it. Technically, the stock has been supported near S$0.57 and a break above S$0.75 may see it test S$0.85.
Nam Cheong (NCL SP, N4E) – Strong earnings visibility from a record net orderbook
Last price: S$0.275
Target Price: S$0.34
Nam Cheong’s reported 1Q13 profit was in line with our forecast. A key positive was the sale of five vessels, bringing net orderbook to a record RM1.3b. This provides strong earnings visibility for the next three years. According to management, there have also been more enquiries on built-toorder vessels, which is a sign of an industry-wide uplift in activity. Management disclosed more details about the shipbuilding programme for 2014, which we view as a wellbalanced mix of different vessel types. We maintain BUY and target price of S$0.34, based on 9.7x 2014F PE. Technically, the stock has been supported near S$0.24 and may continue to rise towards S$0.32.
Swiber Holdings (SWIB SP, AK3) – Trading at a deep discount to our RNAV
Last price: S$0.695
Target Price: S$0.86
Swiber’s 1Q13 results were above expectations due to higherthan- expected turnover and associates’ contributions. Gross margin fell due to a different revenue mix. Swiber has won only about US$150m worth of contracts ytd. Management said project tenders are taking longer to conclude because of their large size but they are eyeing three with an estimated value of US$300m each. These projects are likely to be awarded in 2013. Swiber’s extensive regional footprints yield economies of scale. While its high gearing is a still concern, it should start tapering off from 2014 onwards as Swiber’s capex programme is at a tail-end. The share price of 58%-owned Kreuz has appreciated more than 80% ytd and this has enhanced Swiber’s value. We estimate Swiber now trades at a more than 30% discount to our estimated RNAV. We maintain BUY and target price of S$0.86, based on a 2014F PE of 6.2x.
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