Nam Cheong Sells Vessels for $43.1 Million

By MarEx 2014-03-31 11:02:00

- Strong sales momentum with 7 vessels sold in first three months in 2014;
- AHTS sold to new customer, emerging oil and gas player, in Malaysia;
- PSV sold to a repeat customer in West Africa – booming oil and gas sector;
- Cumulative order book hits RM1.4 billion (approximately S$539.8 million1);
- Sales to contribute positively to FY2014 earnings.

Nam Cheong Limited (“南昌有限公司”) (“Nam Cheong”), or together with its subsidiaries, the “Group”), a leading global offshore marine player listed on the Main Board of the Singapore Exchange Securities Trading Limited (the “SGX”) and Malaysia’s largest Offshore Support Vessel (“OSV”) builder, today reported that it has sold another two vessels worth approximately US$43.1 million (approximately S$54.4 million2), making it a record sale of seven vessels within the first three months of this year. With these two latest sales contracts, Nam Cheong’s order book has hit RM1.4 billion (approximately S$539.8 million1).

One Anchor Handling Towing Supply Vessel (“AHTS”) was sold to an emerging player in the oil and gas sector, a subsidiary of a new customer, Kayfour Development Corporation Sdn Bhd, which will be operating the vessel via its subsidiary, Multi Marine Venture Sdn Bhd. Sale of one Platform Supply Vessel (“PSV”) was made to a repeat customer in West Africa, E.A. Temile and Sons Development Company of Nigeria Limited, an established engineering and construction company.

Mr. Leong Seng Keat (“梁成杰”), Nam Cheong’s Chief Executive Officer said, “We are very pleased with this strong sales momentum, with seven vessels sold in the first three months of the year. Notably, since our first entry into West Africa in August 2012, we have made good progress, with our first repeat business from a customer operating in this region, known for its strong prospects in oil discoveries.” Analysts had estimated that total oil reserves in West Africa are between 10 to 15 billion
barrels3.

In October 2012, Nam Cheong sold a similar PSV measuring at 5,000 dead weight tonne (“dwt”) to the same customer in West Africa.

Analysts are expecting E&P spending to reach a new record of US$723 billion this year, with an increasing number of active rigs coming to market4. As a result, it is expected that more OSVs will be required to serve the industry5. In addition, 30% of the global AHTS fleet is over 25 years-old6.

On the industry outlook, Mr. Leong added, “As operators seek to grow their efficiencies and capacities, and given the strong sectorial prospects, we expect to see an increase in replacement activities.

“We have also observed that supply remains tight in some segments such as vessels that are involved in the oil production stage. Hence we expect spending to be sustained or increased, especially in relation to oil production and enhanced oil recovery areas.”

Both these vessels sold are being constructed as part of the Group’s build-to-stock series in the Group’s subcontracted yards in China. They are scheduled for delivery in 2014 and are expected to contribute positively to the Group’s earnings for the financial year ending 31 December 2014.

1 Based on an exchange rate of 1.00 MYR = 0.385567 SGD
2 Based on an exchange rate of 1.00 USD = 1.26134 SGD
3 ‘West Africa bets on Brazilian style oil jackpot’ – Reuters, November 29, 2013
4 ‘Barclays Global 2014 EP Spending Outlook’ – Barclays Global, December 9, 2013
5 ‘Asia Offshore and Marine Sector’ – Credit Suisse, January 20, 2014
6 ‘Ideal Investment Scenario for Offshore Support Vessels’, Synergy Offshore, March 6, 2013

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