Unsold vessels, zero order wins haunt struggling Nam Cheong

Its orderbook is steadily shrinking.

Nam Cheong, the Mainboard-listed builder of offshore support vessels (OSVs), has just warned of loss in the fourth quarter. Now, analysts warn that there might be more pain ahead for the shipbuilder.

According to DBS, Nam Cheong has not won any orders since the first quarter of 2015. In addition, is yet to sell eight vessels under its 2015 built-to-stock programme, with another 18 unsold under its 2016 programme.

Among these vessels are 12 platform supply vessels (PSVs), which DBS says is one of the most oversupplied vessel types in the offshore service vessel market.

“This does not bode particularly well for Nam Cheong’s vessel sales prospects in the near to medium term,” DBS said.

The company’s net orderbook has thus experienced a steady decline from RM1.3bn as at end-FY14 to RM880m as at end-3Q15.

DBS added that Nam Cheong’s loss guidance for 4Q15 could be due to steep slowdown in revenue recognition for vessels under construction.

“Customers are probably attempting to stretch out delivery dates further. Order cancellations are also possible. Nam Cheong’s net margins have trended down in recent quarters, with 3Q15 just breaking even on a net profit level,” DBS said.