SINGAPORE (March 1): DBS Bank is maintaining Nam Cheong at “fully valued” with 4 cents target price despite the Malaysian shipbuilder reporting smaller 4Q16 losses compared to a year ago.

With zero new orders since last March, negative operating cash flows for FY16, continuing trend of order cancellations and the OSV market facing an oversupply situation, the outlook remains bleak for Nam Cheong, says analyst Suvro Sarkar in a Tuesday report.

In addition, the group faces major liquidity hurdles with bank debt of RM670 million ($212 million) currently maturing while three notes of $90 million, $75 million, $200 million are maturing in FY17, FY18 and FY19 respectively.

Although these could be financed with a combination of cash from deliveries and additional drawdowns of credit facilities, Sarkar says there is a risk to both these sources as owners push back delivery dates and credit facilities are subject to lenders’ risk tolerance.

To recap, Nam Cheong’s 4Q16 core shipbuilding revenue came in at RM40 million. This was way below pre-crisis levels of about RM200-500 million while its orderbook, which is slowly being drawn down with no replenishment, now stands at RM430 million. Meanwhile, the charter segment reported its sixth consecutive quarterly gross loss.

DBS is also lowering its revenue forecasts for FY17/18 on the back of cancellation of Perdana’s second AWB and further push-back of the existing delivery schedule for vessels on order.

“We expect net losses to persist for Nam Cheong as revenue is not sufficient to cover operating and finance costs,” says Sarkar.

As a result, DBS is forecasting Nam Cheong to post core net losses of RM45 million in FY17 and RM42 million in FY18.

Shares of Nam Cheong closed flat at 5 cents on Wednesday.

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