Nam Cheong Barging Forward – Accom Work Barge Orders & Shares buybacks.

Barging Forward
While outstation this week, I read that Nam Cheong continues to “Cheong” (Hokkien for charge) forward with USD84mil orders to build two
Malaysia’s largest Accommodation Work Barges (AWB) of 500-men with options to
build two more, for repeat client Perdana. Unlike its usual Build to Stock
model, the two AWB would be constructed under the build-to-order (BTO) model
with delivery scheduled for 2016.
Order book now stands at MYR1.5b vs End March of MYR1.4b. Nam Cheong had  also managed to registered strong growth yoy since 2009. FY2013
net profit saw 51% growth to RM206.2 million. 
To reward
its shareholders, N
am Cheong also raised its
dividend to 1 cent a share for FY2013, double the amount in FY2012.
FY2013 dividends amounted to S$21.0 million, representing a payout ratio of 27%.
Its recent 1Q2014 results announced in May also seen net profit surged
of 99% to a record high of RM71.3m from RM35.8m in 1Q2013. Gross profit margin is
also up by 2.6% to 21.2%, while net gearing ratio of 0.35x ensures headroom for
Base on Nam Cheong last close price of 39.5c, PE is undemanding at 7.4 (based
on annualized 1Q14 EPS).
Last year Nam Cheong is also awarded at the SIAS Investor’s Choice
Awards as winner for the Most Transparent Company for the category of Foreign

Share Buybacks
Nam Cheong also initiated a series of buybacks in the last month
or so.
It bought back 2 million shares at 37.5c apiece
on May 23 and 3.5 million shares on Jun 16 at 38.5c apiece.
On three occasions
in August and October last year, its CEO Leong Seng Keat also bought a total of
10 million shares at between average price of 27c a share.
Nam Cheong stock price had rose impressively from 11c in Dec 2011 to 24c
in Apr 2013 and 38c in Jun 2014.
Companies normally buy back their shares aggressively when their stock
prices are at disappointing low. The management then believes that the stock
price is undervalued and buy at a good bargain. In the case of Nam
Cheong, it is exact opposite! It repurchases shares in the market at all-time
record high pricing in the past weeks.
This is a clear indication that the company is confident on her business
prospects and thinks that its share price is undervalued even at record highs.  
Rolf’s View
With the robust offshore and marine sector outlook particularly in the shallow water segment, expect Nam Cheong to
continue its “cheong” with improved performance at least for the next two to three years. 

Its growth is also facilitated from excess ship-producing capacity
in China as it outsources most of its orders to Chinese yards and gets preferential
rates currently.

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