Nam Cheong Ltd Wants To Be Triple-Listed: What Does It Mean For Its Investors?

Nam Cheong Ltd (SGX: N4E) is a leading offshore support vessel (OSV) builder based in Miri, Malaysia. The word “leading” is used appropriately here as Nam Cheong has been responsible for around 15% of global OSV production this year. According to an interview with The Edge Malaysia, Nam Cheong claims that it is the second largest builder of OSVs in this region with a 7% market share.

The Malaysia-based company is currently listed only in Singapore but it’s contemplating a new move: It wants to be listed in Malaysia and Norway  as well. If successful, Nam Cheong would be a triple-listed company. What would this mean for the firm’s existing shareholders?

According to Nam Cheong’s management, there is no need for the company to raise any additional funds (one of the reasons companies list themselves on a stock exchange is to raise funds). Instead, the potential listing exercise in Malaysia and Norway is made purely to improve 1) the company’s branding; 2) the liquidity of the company’s shares; and 3) investors’ perception of the firm.

Nam Cheong’s management also feels that the listing exercise would indirectly enhance existing shareholder value as well.

From its latest quarterly results, the company currently has a net debt to equity ratio of 60%. That’s not exactly low. If the listing in Malaysia and Norway is to happen and the company successfully sells new shares and raises some capital, existing shareholders might be happy to see the company’s balance sheet strengthen, even if management has stated that the company’s not in need of additional funds.

The company has mentioned in The Edge that it ”hopes to achieve an annual growth of 20% to 30% over the next five years.” Nonetheless, the act of listing itself in foreign share markets would most likely increase the outstanding share count significantly, hence diluting current shareholders. Nam Cheong would need to ensure that there’s still substantial per-share growth in its business after any potential increase in share count. Otherwise, existing shareholders won’t be able to benefit from the company’s growth.

Foolish Summary

Nam Cheong has done well for its shareholders since its reverse takeover in 2011 with revenue growing from RM606 million in that year to RM1.53 billion over the last 12 months. Along the way, its profit has nearly tripled from RM93 million to RM264 million. This growth has propelled Nam Cheong’s share price from S$0.25 to S$0.41.

The company’s track record since its transformation has been impressive. Let’s see what it can do going forward.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn't own any shares of companies mention above