Nam Cheong

[GreedandFear]

The weird part about Nam Cheong is that they commence their building without orders. Prima facie they seemed to be employing Jaya model. Surprisingly most of their construct were able to be sold off before completion so either their demand forecast is excellent or their Malaysian customer like them very much

BTW Jaya did not implode due to their business model. They imploded due to leverage under the new PE owner failed LBO

I agree BTS (Build-to-Stock) is more risky than BTO (Build-to-Order). Nam Cheong is doing it, Jaya also is doing it, and ASL Marine has started doing the same recently.

I am not an expert in OSV sector, but it seems a viable strategy in this sector, with the followings, IMO

- Offshore rig seems pretty standard, thus the OSV, which typically need little customization. In short, there is always market for a ready-made OSV.
- BTS enables order-on-demand or within a shorter timeframe, while BTO needs typically 1-2 years to build. The strategy meeting the need of a unique customer segment, which require fast delivery
- With a shorter delivery, or even on demand, will allow a premium on price, thus higher margin.

(not vested)

It is a good strategy in a bull market but the real test will be whether they have the ability to spot the turn in the cycle (when it comes) and will then have the foresight to significantly scale down their build to stock strategy.

What I still find weird, about this company, is that they can continue to act as a middleman (outsourcing the vast majority of their ship building to China) and their customers do not cut them out.

(Vested but for a smallish trading position)