Thursday, October 24, 2013

********** Potential Breakout Play: Nam Cheong. Share price 0.29. ( When will it break above the KEY 0.300 resistance ? )

Following up from call made on 30th September 2013. Nam Cheong has still not been able to break above the Critical 0.300 resistance level. This would surely be a KEY level to watch. Those who have the holding power can consider holding some long positions in wait for the breakout. Mainly a buy on Breakout play if the 0.300 till 0.31 clears out completely. A break above 0.300 can result in a NEW UP PHASE again and target would be 0.34 to 0.36 in the near term. Can consider averaging up on the breakout from 0.305 to 0.31. Note that since April 2012, it has also been consistently trading above the 200 DAY MA (Dotted blue line) which can also signal that the uptrend in the longer term is still very much intact. Critical resistance is seen crucially at 0.300 currently where there are huge Sellers stacks. After 0.300, sellers are min. It may continue to consolidate for no idea how long below the 0.300, so this is mainly a Buy on Breakout play if the 0.300 critically clears out.
Stop loss at 0.28 for Long Positions on breakout.
Maybank KE – 23RD Oct 2013
Nam Cheong: Risk Taker Sees Rewards; Initiate BUY, TP $0.37
Ø  Initiate BUY and TP of SGD0.37, pegged to 9x PER on average FY13-15F EPS. We see Nam Cheong benefiting from (1) a recovering Offshore Support Vessel (OSV) market, (2) OSV replacement cycle, (3) Petronas’ Oil & Gas capex and (4) its foresight in reading the supply-demand dynamics of the sector.
Ø  Nam Cheong has demonstrated a strong ability to read market demand with a track record of selling all build-to-stock vessels before delivery. 2014 shipbuilding program is a big ramp-up over 2013 and it has already sold 57% of the 2014 vessels. Outstanding orderbook stands at MYR1.7b. We expect the company to deliver 16% EPS CAGR over FY13-15F as vessels in its ramped-up newbuild programs are readily absorbed by the market.
Ø  At current share price, stock is trading at only 6.1x/6.6x FY14F/15F PERs, inexpensive considering the robust growth prospects, higher ROEs and shipbuilding margins. We also see possibility of higher dividend payout in FY14F translating into a yield of about 5%.

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