Nam Cheong

[GreedandFear]

The weird part about Nam Cheong is that they commence their building without orders. Prima facie they seemed to be employing Jaya model. Surprisingly most of their construct were able to be sold off before completion so either their demand forecast is excellent or their Malaysian customer like them very much

BTW Jaya did not implode due to their business model. They imploded due to leverage under the new PE owner failed LBO

I agree BTS (Build-to-Stock) is more risky than BTO (Build-to-Order). Nam Cheong is doing it, Jaya also is doing it, and ASL Marine has started doing the same recently.

I am not an expert in OSV sector, but it seems a viable strategy in this sector, with the followings, IMO

- Offshore rig seems pretty standard, thus the OSV, which typically need little customization. In short, there is always market for a ready-made OSV.
- BTS enables order-on-demand or within a shorter timeframe, while BTO needs typically 1-2 years to build. The strategy meeting the need of a unique customer segment, which require fast delivery
- With a shorter delivery, or even on demand, will allow a premium on price, thus higher margin.

(not vested)

It is a good strategy in a bull market but the real test will be whether they have the ability to spot the turn in the cycle (when it comes) and will then have the foresight to significantly scale down their build to stock strategy.

What I still find weird, about this company, is that they can continue to act as a middleman (outsourcing the vast majority of their ship building to China) and their customers do not cut them out.

(Vested but for a smallish trading position)

[CityFarmer]

The accommodation vessel seems getting popular...

(not vested)

--------
NAM CHEONG CLINCHES CONTRACT FOR TWO ACCOMMODATION WORK BARGES WORTH APPROXIMATELY US$84 MILLION
- First-of-its-kind in Malaysia and largest Accommodation Work Barges to be built by Nam Cheong;
- Sold to Perdana Petroleum Berhad, with option to purchase another two;
- Order book stands at RM1.5 billion (approximately S$581.7 million)

http://infopub.sgx.com/FileOpen/NCL_News...eID=302251

[CityFarmer]

One more accommodation vessel sold by the company.

(not vested)

----------
The Board of Directors of Nam Cheong Limited (the “Group” or “Nam Cheong”) is
pleased to announce that it has secured sale contracts (collectively the “Contracts”) for
four vessels with a total value worth approximately US$92 million.
Three Platform Supply Vessels (“PSV”) of 3,000 dead weight tonne (“dwt”) each,
equipped with Dynamic Positioning System 2 (“DP2”) was sold to a repeat customer
which is a leading oilfield services company based in Asia.
The sale of a 200-men Accommodation Work Boat (“Work Boat”), also equipped with
DP2, was made to a subsidiary of a new customer, Maridive And Oil Services S.A.E
based in North Africa, an established offshore marine and oil support services company
in the Middle East and North Africa region.

http://infopub.sgx.com/FileOpen/NCL-PSV1...eID=303572

[specuvestor]

The accommodation vessel seems getting popular...

(not vested)

--------
NAM CHEONG CLINCHES CONTRACT FOR TWO ACCOMMODATION WORK BARGES WORTH APPROXIMATELY US$84 MILLION
- First-of-its-kind in Malaysia and largest Accommodation Work Barges to be built by Nam Cheong;
- Sold to Perdana Petroleum Berhad, with option to purchase another two;
- Order book stands at RM1.5 billion (approximately S$581.7 million)

http://infopub.sgx.com/FileOpen/NCL_News...eID=302251

Their semi-competitor view is that accommodation vessels are too volatile and spot priced. Might not be an issue for those that sell them, but might be interesting to see those that operates them ie POSH

[CityFarmer]

The accommodation vessel seems getting popular...

(not vested)

--------
NAM CHEONG CLINCHES CONTRACT FOR TWO ACCOMMODATION WORK BARGES WORTH APPROXIMATELY US$84 MILLION
- First-of-its-kind in Malaysia and largest Accommodation Work Barges to be built by Nam Cheong;
- Sold to Perdana Petroleum Berhad, with option to purchase another two;
- Order book stands at RM1.5 billion (approximately S$581.7 million)

http://infopub.sgx.com/FileOpen/NCL_News...eID=302251

Their semi-competitor view is that accommodation vessels are too volatile and spot priced. Might not be an issue for those that sell them, but might be interesting to see those that operates them ie POSH

Yes, I share similar view. The same for investing in kitchen equipment supplier, rather on the F&B outlets.

I wonder what else the needs of the accommodation vessels? Daily ferry of staffs between the vessels and rigs? Will Penguin benefited as well? Need time to find out more...

The company seems has sufficient BTO projects to fill in its capacity, rather than relying on BTS strategy.

(not vested)

[specuvestor]

OT a bit, actually my observation is that the old adage of buying the pick and shovel companies is not always true, in fact mostly untrue. Semicon equipment makers and shipbuilders are good examples.

But in this case, the spot price nature of accommodation vessels does make the builder "safer"

If penguin could or chose to do it, it would have already done so for the offshore rigs and coast. I think Accommodation vessels are very niche for very offshore projects. I wonder what's the driver for POSH to focus on it.

[CityFarmer]

OT a bit, actually my observation is that the old adage of buying the pick and shovel companies is not always true, in fact mostly untrue. Semicon equipment makers and shipbuilders are good examples.

I have a slightly different view. For example, shipbuilders weren't doing as bad as shipper in the last down cycle. Shipbuilding companies has more flexibility, vs. the shipping companies to adapt to market downturn. Similar as kitchen equipment suppliers, no restaurants, then go to food court stalls, but restaurant owners unlikely to "downgrade" to food court stall owners.

Of course, if you bet on a wrong sector at a wrong time, the choice will not save you.

But in this case, the spot price nature of accommodation vessels does make the builder "safer"

If penguin could or chose to do it, it would have already done so for the offshore rigs and coast. I think Accommodation vessels are very niche for very offshore projects. I wonder what's the driver for POSH to focus on it.

Penguin will not build accommodation vessel, with its company structure. Penguin is excel in building vessels to ferry, rather than to accommodate people.

I am finding out the "prospect" of the accommodation vessels, and POSH is a good reference. I reckon it is a new need, after more offshore sites in deeper water. At the moment, shallow water operation still the majority. The accommodation vessels provide better accommodation and facilities, to help the recruitment of staffs.

[specuvestor]

Over a cycle, in general my sense is equipment providers don't do better than operators. They are deep cycles. So far I only see ASM Pacific that is more the exeption than norm. Personally I find this old adage to be sexy but not really true.

ya I'm saying Penguin would have been doing the ferry between offshore rigs to coast. Accomodation vessels is cannot "book-out" type

[CityFarmer]

The company 2Q report is announced today. The O&M sector is booming.

It seems I have missed more "wonderful" stocks than I have vested...

(not vested)

-------
NAM CHEONG’S NET PROFIT RISES 53% TO RM63.0 MILLION1 FOR 2Q 2014
- Strong revenue growth on the back of larger order book of approximately RM1.7 billion;
- Gross profit margins of 18% maintained at healthy range;
- Low net gearing ratio of 0.60 times as at June 30, 2014 ensures headroom for growth

http://infopub.sgx.com/FileOpen/NCL-News...eID=308929

[specuvestor]

Just a follow up post on what we discussed... waiting to see POSH results