Nam Cheong "well poised" to benefit from brewing Asian OSV uptick: UOB

Its robust stock will meet soon-to-rise demand.

Here's more from UOB Kay Hian:

Takeaways from Oil Service Conference. Management painted a positive outlook for the Asian OSV market, specifically for smaller AHTS vessels and PSVs. Nam Cheong is well poised  to benefit from this trend as it has a ready stock of these in-demand vessels, offering clients short delivery lead time. 

What’s New. We hosted an oil service conference in Singapore on 26-27 November, which saw the participation of eight oil service companies and about 30 fund managers. 

Resurgence in demand for smaller AHTS vessels. Management indicated that in the past few months, there have been pockets of strong demand for 5,150-bhp (brake horsepower) AHTS vessels in Asia, reversing the oversupply of commoditised, smaller vessels over the past  three years. In Nov 12, Nam Cheong sold four build-to-stock (BTS) 5,150-bhp AHTS for US$45m, of which three were sold to customers in Asia.

Positive on the PSV market. Management continued to be positive on the market for larger PSVs greater than 2,000dwt. In Asia, multipurpose AHTS vessels have been more commonly used because E&P activities take place near the shore. However, as offshore activities are moving further away from the shore, PSVs have become essential as they have larger deck space and are more fuel efficient over longer distances than AHTS vessels. Nam Cheong is well positioned to benefit from this trend as the group will deliver nine BTS PSVs in 2013.

Vessel sales on track. To date, Nam Cheong has sold 16 of the 18 BTS vessels to be completed in 2012, and nine of the 19 BTS vessels to be completed in 2013. We expect Nam Cheong to sell the remaining two vessels that are to be completed in 4Q12. We believe the sale of these vessels will be a positive catalyst as they are high-value highspecification vessels that are estimated to account for 21.5% of the total value of vessels completed this year.

Focus on shallow-water, mass-market products. Nam Cheong will continue to focus on shallow-water, mass-market vessels which are highly marketable and widely accepted by oil majors globally. In addition, Nam Cheong further enhances the marketability of their vessels by using high-quality equipment from well-known suppliers such as Rolls Royce, Wartsila and Caterpillar.