Nam Cheong third quarter profit up 8% to S$19.2mn

Revenue jumps 45% from S$71.2mn to S$103.1mn with strong order book of S$261mn.

Nam Cheong Limited (“Nam Cheong”), SGX Main Board-listed Malaysian-based leading global Offshore Support Vessel (“OSV”) shipbuilder that focuses on the construction and engineering of complex, sophisticated and environmentally-friendly OSVs, reported an 8% increase in net profit to RM46.8 million for the three months ended September 30, 2011 (“3Q 2011”), from RM43.2 million in the corresponding period last year (“3Q 2010”). This was achieved on the back of a revenue of RM251.5 million in 3Q 2011, which represented a 45% jump from RM173.7 million in 3Q 2010. 

3Q 2011 is the strongest quarter in this financial year following a series of contract wins for Nam Cheong. Starting in July, the Group sold eight vessels in just over two months: five Anchor Handling Tug Supply (“AHTS”) vessels, two Platform Supply Vessels (“PSV”) and one Multi-Purpose Support Vessel. The multi-purpose support vessel was sold pursuant to a joint venture agreement with three major oil and gas service providers in the region.

Datuk Tiong Su Kouk, Executive Chairman and CEO of Nam Cheong, said: “We significantly increased our shipbuilding revenue this quarter, resulting in the achievement of our strongest quarter for this financial year. We are pleased to have surpassed last year’s order wins of 10 vessels. As oil prices remain high and oil majors continue to invest in exploration and production (“E&P”) activities in the region, we expect momentum for the offshore marine industry – especially in Malaysia – to remain brisk.” 

As at 10 November 2011, the Group’s order book comprises 11 vessels amounting to a total value of RM638 million. These vessels are scheduled for delivery stretching till end of 2012. 

Outlook

With the current level of oil prices, offshore marine E&P activities for new supplies and new sources of oil remain attractive and the overall outlook for the industry is positive. The Directors note that oil majors continue to invest in equipment and vessels essential for these E&P activities, both in Malaysia and the region. The uptrend in investments is evidenced by Nam Cheong’s recent sales of eight vessels in 3Q 2011: five AHTS vessels, two PSVs and one Multi-Purpose Support vessel.

The Group expects to see a continuing demand for AHTS vessels, PSVs and other offshore equipment. As offshore service providers replace older vessels with new and higher specification vessels, the demand for small size AHTS vessels remains strong. New businesses relating to top side maintenance, hook up and commissioning, and exploitation of reserves from marginal fields have also created new opportunities for the Group.

“The active pursuit of these opportunities has led Nam Cheong to secure a vessel chartering contract through the joint venture that was formed in September 2011,” said Mr Leong Seng Keat, Nam Cheong’s Executive Director. “Going forward, based on our study of existing general market conditions and customer feedback, the Directors believe that the Group’s order book will continue to register healthy growth.”

Supporting the Directors’ views are the following developments:

1. More vessel charterers are adding PSVs to their existing fleet as E&P activities expand into deeper waters.
2. Of the current 106 marginal oil fields in Malaysia, which are estimated to contain 580 million barrels of oil, 27 are being developed by Petronas. This has spurred investors’ interest in the country’s offshore resources and new oil and gas projects. The oil majors are expected to invite more tenders to charter AHTS vessels, work boats, work barges and offshore equipment to work in these marginal oil fields in Malaysia in the immediate future and Nam Cheong is strategically positioned to seize these opportunities.