• For the uninitiated, Nam Cheong Ltd, whose stock has been on a tear ($1.53, +63% year to date), derived revenue and profit from two sources in 2025 and recent years -- chartering out its fleet of vessels and disposing some of its vessels for a big gain. • Because it also owns a shipyard (in Sarawak), it builds vessels for its own use, resulting in an expanding fleet (36 vessels currently) with a youthful average age (8). • From this year, there is a third source of revenue and profit: Building four vessels worth US$64.5 million for a UAE oil major. This first order in a decade shines a spotlight on the potentially big shipbuilding business for Nam Cheong (market cap: S$609 million).  Source : https://www.rivieramm.com/news-content-hub/news-content-hub/high-osv-demand-ageing-fleets-drive-higher-utilisation-charter-rates-87665• The offshore support vessel fleets operating in the region and worldwide are ageing because of a scarcity of newbuilds since the oil crisis -- and oversupply of vessels -- of 2014. • Nam Cheong, which underwent tough times back then, emerged from a restructuring of its debt in early 2024, and has regained gradually its footing in the industry. Read excerpts of CGS report below ... |
Excerpts from CGS report
Analysts: Meghana Kande & Lim Siew Khee
■ Key highlight of our post-results NDR was NCL management’s confidence in securing further newbuild orders given active enquiries from charterers.
■ We expect fleet utilisation to improve to 69% (+4% pts yoy) in FY26F on the start of all long-term charters and potential new charters for two idle vessels. ■ We raise our FY27F EPS estimate by 3%, incorporating stronger order wins and fleet utilisation assumptions. Reiterate Add with a higher TP of S$1.92. |
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FY25: disposal gains cushion one-off higher maintenance costs
Nam Cheong (NCL) posted FY25 revenue of RM620m (-9% yoy), which was in line at 103% of our estimate.
GM compressed 4% pts yoy to 49% vs. our expected 51% as NCL incurred higher maintenance costs for
| 1) long-term contracted vessels prior to commencing their charters by end-2025, and 2) two platform supply vessels (PSV) prior to their disposals in Dec 2025 and Jan 2026. |
NCL expects these costs to subside from 1Q26F and is targeting c.50% chartering GM for FY26F.
Reported core PATMI (including vessel disposal gains) was in line with our estimate as softer GM was offset by larger-than-expected disposal gains, excluding which core PATMI of RM159m was 7% below our estimated RM170m. 
Nam Cheong has received orders from a UAE oil major to build 2 of the above vessel. It operates on a remote control system developed by SeaOwl Group (a France-based marine services company). The vessel will also be equipped with built-in auto docking capability and used for logistical operations that require rapid deployability, versatility and crewless functionality.
Active enquiries for newbuild orders
Management noted shipbuilding enquiries from charterers in Southeast Asia and Middle East were largely focused on fuel-efficient and hybrid-battery anchor handling tug supply vessels (AHTS) and PSVs to replace ageing fleets.
NCL has the capacity to build roughly eight vessels at a time at its Miri yard, with additional flexibility to tap partner Chinese yards if it secures larger or more urgent orders.
We now expect larger order wins of RM350m/RM200m for FY26F/27F (RM120m over FY26F-27F previously), following higher-than-expected value of US$64.5m (c.RM250m) for the order secured in Feb 2026.
Expect elevated fleet utilisation in 2026F
Fleet utilisation in FY25 was in line with our expected 65%.
We raise our fleet utilisation forecast for FY26F to 69% (from 68%), closer to NCL’s guided 70% for 2026F on the commencement of all long-term charters and potential new charters for two idle vessels (AHTS and workboat).
NCL also has three vessels scheduled to enter its fleet by 1H26F and another three by end-2026F, with full contribution likely from FY27F.
We see scope for upside to our FY28F net profit estimate on any further vessel additions.
We maintain our Add call given NCL’s potential for earnings growth from newbuild orders and fleet expansion.
Re-rating catalysts: fleet expansion, higher-thanexpected shipbuilding orders and announcement of vessel disposals that would free up capital to be deployed towards debt repayment or yard activities. Downside risks: lowerthan-expected utilisation and higher costs impacting margin. |
→ See CGS' report here and DBS' (target price: S$1.60) here.
