Financial Analysis: Nam Cheong Limited Reports Net Profit Growth of Over 100%

Business Description

Nam Cheong Limited is a global offshore marine group based in Sarawak, Malaysia. The company specializes in building and chartering Offshore Support Vessels (OSVs). Nam Cheong’s core business operations include OSV chartering and the construction and engineering of sophisticated, environmentally friendly OSVs equipped with the latest technology for use in offshore oil and gas exploration and production industries. The company’s customer base spans across Malaysia, Southeast Asia, the Middle East, West Africa, Latin America, Europe, and the United States. Nam Cheong operates a chartering fleet of about 30 vessels and owns one of the largest shipbuilding yards for OSVs in Malaysia.

Industry Position and Competitors

Nam Cheong is a leading OSV provider in Southeast Asia. The company’s young and diversified fleet positions it well to capitalize on the expanding offshore and marine markets. Competitors in the industry include other global and regional OSV providers, but Nam Cheong’s scale, fleet diversity, and technological advancements give it a competitive edge. The market is expected to grow with increased offshore capital expenditure and hydrocarbon projects in the Asia-Pacific region.

Revenue Streams and Customer Base

Nam Cheong’s primary revenue stream is from vessel chartering. The company recorded a total revenue of RM512.4 million in 9M2024, marking a 46% year-on-year increase. This growth is driven by improved daily charter rates and higher utilization of larger vessels. The company’s customers include major players in the offshore oil and gas industry, and its diversified geographic footprint mitigates market-specific risks.

Financial Statement Analysis

Income Statement

For the nine months ended 30 September 2024, Nam Cheong reported a revenue of RM512.4 million, a 46% increase from RM350.2 million in 9M2023. Gross profit more than doubled to RM261.5 million from RM124.8 million, with the gross margin improving by 15.4 percentage points to 51.0%. The net profit after tax rose significantly to RM686.7 million from RM94.4 million in the previous year, largely due to the waiver of debts under the 2024 Scheme and the DRMA.

Balance Sheet

The balance sheet details are not provided in the document. However, the significant reduction in finance costs by 29% to RM14.7 million for 9M2024 indicates a stronger financial position post debt restructuring.

Cash Flow Statement

Details on the cash flow statement are not included in the document. However, the increased revenue and reduced finance costs suggest improved cash flow from operations.

Key Findings

• Revenue Growth: 46% increase in revenue to RM512.4 million.
• Gross Margin Improvement: 15.4 percentage points increase to 51.0%.
• Net Profit Growth: Net profit after tax grew significantly to RM686.7 million from RM94.4 million.
• Debt Restructuring: Successful debt restructuring reduced finance costs by 29%.
• Market Position: Well-positioned to capitalize on expanding offshore and marine markets.

Special Actions

The company successfully restructured its debt in March 2024, which has positively impacted its financial performance by reducing finance costs and increasing net profit.

Recommendations

If Currently Holding the Stock

Given the strong financial performance, significant net profit growth, and improved market conditions, it is recommended to continue holding the stock. The company’s strategic debt restructuring and market positioning indicate potential for sustained growth.

If Not Currently Holding the Stock

It is recommended to consider investing in Nam Cheong Limited. The company’s impressive revenue and net profit growth, coupled with a strong market position and reduced financial risk post debt restructuring, present a compelling investment opportunity.

Disclaimer

The above recommendations are based on the financial report provided and the current market conditions. Investors should conduct their own research and consider their financial situation before making any investment decisions.