Austerity measures: Nam Cheong hit by Malaysia’s steep capex cuts

Its margins will ease considerably.

Nam Cheong’s gross margins, which currently stand at over 20%, are expected to fall to around 15% as its clients continue to slow down on capex spending for new OSV purchases.

According to UOB Kay Hian, Nam Cheong is particularly hard hit by Petronas’ steep capex cut, which will impact Nam Cheong’s BTS model.

“Management noted thatcustomers are taking a longer timeframe in assessing their OSV requirements and
delaying/lowering their capex commitments due to the recent oil price collapse. Gross margins are expected to normalise from the current levels of >20% to mid-teens for the next few quarters. Nam Cheong’s recent vessel sales (1 AHTS and 1PSV) were done at a slight ~5% discount to what it had achieved during the peak of oil prices,” stated UOB Kay Hian.