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Tuesday, December 9, 2014

Nam Cheong downgraded to "hold", target cut to 38 cents by OCBC

SINGAPORE (Dec 9): OCBC Investment Research has downgraded Nam Cheong ( Financial Dashboard) to "hold" from "buy" and reduced its price target to 38 cents after lowering its valuation multiple to seven times projected FY2015 earnings from 9.5 times.
The changes reflect a de-rating in the oil and gas sector amid falling oil prices.
"Though Nam Cheong has enjoyed a more diversified customer profile over the years such that Malaysian customers accounted for only about 20%-30% of year-to-date vessel sales, the fall in oil price is a global event and should impact all of Nam Cheong’s customers," OCBC analyst Low Pei Han said in a note today.
"Should an industry downturn be worse than expected, the group would face higher risks on margins and even the possibility of unsold vessels," she said.
The shipbuilder has sold 27 of the 30 vessels scheduled for delivery this year, and is looking to deliver 35 vessels in 2015.
For now, the risk of Nam Cheong facing order cancellations is low as its vessels operate in shallow waters, where oil companies have not cut production, according to Low.
Nam Cheong shares were flat at 34 cents at 9:04am (0104 GMT). 

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