Excerpts from analysts' reports

UOB Kay Hian initiates coverage of cash-rich Lantrovision

Analyst: Loke Chunying

lantro_uob5.14We initiate coverage on Lantrovision with a BUY recommendation and target price of S$0.645. Lantrovision is principally engaged in the installation and maintenance of structured cabling systems for the finance and IT sectors. 

With over 20 years of operational history, Lantrovision has formed and maintained strategic relationships with a group of blue chip clients that include major banks and global MNCs.

With a net cash position of S$82.1m that forms 64% of current market cap, Lantrovision is trading at a compelling valuation of 4.0x (ex-cash) FY15F PE, which is at a steep 52% discount to its peers’ average trailing 12M PE of 8.3x. 

CIMB lifts earnings forecast and target price of Nam Cheong (to 44 cents)

yeozhibinAnalyst: Yeo Zhi Bin (left)

At 27% of our FY14 estimate, 1Q14 core earnings of RM65.5m (1.2x higher yoy) was 22% above our expectation (vs. 24% above consensus). The positive variance springs from better-than-expected shipbuilding margins. 

We lift our FY14-16 core EPS by 7-16% to factor in the higher margins and upsized 2015 delivery programme. This causes our target price, still based on 8x CY15 P/E (on par with the peer average), to rise. We keep our Add call, with catalysts coming from stronger-than-expected vessel sales and earnings.

2015 delivery programme unveiled 
Nam Cheong has unveiled details for its 2015 delivery programme – it aims to deliver 35 vessels in that year (vs. 30 in 2014).

We note the slant towards 6,000 bhp AHTS (~40% of the programme and a successor to the 5,000 bhp AHTS), which is touted by industry watchers to be the workhorse of the near future. In our view, this reflects Nam Cheong’s ability to keep its ears close to the ground and read vessel trends accurately. 

namcheong_armadatuah12.12Nam Cheong CEO Leong Seng Keat: "Having achieved record order wins in 2013, we expect the sales momentum to continue this year as we tap into a resurgent market.” File photo.Not as risky as it seems 
Management is cognisant of the higher risks associated with its build-to-stock business model that earns more lucrative gross margins of 15-20% than the ~10% for the build-to-order business.

Thus, management has always been cautious and maintained a worst-case scenario operating philosophy.

In this aspect, Nam Cheong focuses on shallow water production assets which will be more resilient than deepwater exploration assets, which are at the highest risk of capex cut.

The group stays in a healthy financial position (1Q14 net gearing of 0.35x) to ensure that it is able to absorb its newbuilds, in the event of a severe downturn. Lastly, it operates an asset-light model by subcontracting 80% of its orders to Chinese yards. 

Recent story: NAM CHEONG -- buy, target 48 c, BOUSTEAD --- hold, $2.00 target


0 #3 Ben Goh 2014-10-07 05:04
Hi guys.anyone has any helpful advice or opinion on midas or china fibretech? Your sharing is greatly appreciated. Tku vm
+1 #2 DerrickOng 2014-05-20 09:53
Im the King of Lantrovision !!! We have accumulated looong B4 this ANALyst opened his mouth at 37.5c... No 60c No Sell !!!
0 #1 Too aggressive... 2014-05-18 12:55
IMHO, the analyst's projection for FY14 ~ FY16 is rather aggressive. Based on the past few years of the firm's financial info; conservative figures ($) should be used instead. Indirectly, the proposed target price does not provide much 'margin of safety'. (Not vested)

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