SGD New Issue Review : Nam Cheong 5Y low 5%

NAM CHEONG: SGD 5 YR ISSUE

– New Nam Cheong SGD 5yr announced. Deal is strongly anchored.
– Initial price guidance: low 5s

Comps:
Nam Cheong 5% 08/2017 100.95/102.05 4.66/4.27%
Nam Cheong 6% 11/2015 102.20/103.05 4.10/3.39%

Credit highlights:

– Largest offshore support vessels (OSVs) builder in Malaysia. Nam Cheong is a leading offshore marine group in Malaysia specializing in the construction of OSVs, which are used to support the offshore exploration & production (E&P) activities of oil majors

– Strong earnings visibility following strong order wins. Orderbook of RM2.0 billion (as at 19 August 2014) will continue to drive financial performance and growth.

– As Malaysia’s largest OSV builder, Nam Cheong is strategically positioned to seize opportunities from favourable domestic market outlook. Nam Cheong stands to benefit from Malaysian cabotage laws that require for more Malaysian flagged vessels. The group stands to benefit from Petronas’ RM300 billion capital expenditure plan. Nam Cheong’s close ties with Petronas-licensed companies will continue to give it a competitive edge in securing contracts.

– Nam Cheong reported robust financial performance for 1HFY2014 with revenue rising 54% to RM786 million (vs RM510 million in 1HFY2013) and
net profit surging 75% to RM134 million (vs RM76 million in 1HFY2013).

It’s been a while and Nam Cheong is back.

Previous 2 Nam Cheong posts :
Oct 2012
https://tradehaven.net/market/bond-vigilante-new-issue-nam-cheong-3y-sgd/

Aug 2013
https://tradehaven.net/market/sgd-new-issue-review-nam-cheong-4y/

After their 5% 4 year SGD 90 mio issue last August at year, they upped their borrowing limit/MTN programme size to SGD 600 mio in Dec 2013.

And now they are back for 5 years at 5%.

They were good in 2012 and remain a pretty healthy company with growing revenues and assets, buoyed by state owned Petronas support. The share price should say something, especially when you put it next to the rest of the O&G share prices out there – Swiber, Ezra, ASL Marine.

Chart : Nam Cheong share price

Benefactor Petronas is not doing so well though, despite Malaysia’s economic boom, warning of a difficult second half for themselves as the world faces a glut of oil (source : FT)

Nam Cheong, at 5% level represents a 3.35% premium over 5 year interest rates. This would be their tightest credit premium they have launched at. The Nam Cheong 4 year 5% carried a premium of 3.6% and the virgin Nam Cheong 6% 3 year paper back in 2012 had a comfortable premium of 5.4%.

But 5% does make some people’s eyes go round for we only have 40 or so bonds in Singapore that deliver that sort of yield and even less if we just consider the senior papers in the 3-5Y tenors.

So between Nam Cheong and say, loss making Kris Energy or Amtek and even, PIL, I guess Nam Cheong still stands tall although I would not like to imagine how much tighter they can go from here (up to SGD 600 mio) without brandishing the Petronas connection badge.