Excerpts from analysts' reports

OCBC Investment Research raises fair value of Nam Cheong to 35 cents.

Analysts: Chia Jiunyang, CFA, and Low Pei Han, CFA

namcheong_ocbc6.13Petronas had pledged to spend RM300b in capital expenditure over 2011-15, 80% more than the previous 5-year period.

We believe this will likely result in increased investments across the Malaysian offshore oil & gas industry.

Already, Nam Cheong is seeing a healthy pick-up in order wins (FY11: 13 vessels; FY12: 21 vessels) and it has recently expanded its shipbuilding programme to 28 vessels for FY14F (FY13: 19 vessels).

Its large order-book of RM1.3b, for 26 vessels delivered over FY13-15F, helps to mitigate its risk by providing a base level of earnings.

Given the strong growth profile, we find current valuation (FY13F PER of 8.6x) attractive.

We now raise our FV to S$0.35 (previously S$0.30) on a higher PER of 11x. Maintain BUY.

Click on above video of Nam Cheong's diesel-electric vessel being launched into the sea off Miri, Sarawak.

JP Morgan sets price target of $2.20 for Olam

Analysts: Ying-Jian Chan, CFA, and James R. Sullivan, CFA


We expect Olam to sustain a c.12% FY13-15E core net profit CAGR driven by c.19% overall sales volume growth and gradual margin expansion.

We believe various concerns surrounding the stock are largely priced-in. Management has committed that it will not need further refinancing until Jun-2014.

We see limited downside for the stock, with re-rating potential from:

1) improving earnings quality as previous M&A begins contributing tangibly, and 2) rebalanced business model targeting positive free cash flow by FY14, although this could be partly offset by slower growth potential than before.

Our Jun-2014 PT of S$2.20 is based on the lower of our P/E-based and P/BV-based methodology, benchmarked against peers Noble and Wilmar.

We believe this sufficiently discounts a number of risk factors. Key downside risk is weaker demand for agri-commodities depressing volumes and margins; key upside risks include delivering on positive FCF and reduced gearing without overly compromising growth. 

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