• Nam Cheong stock ($1.34) has risen 42% year-to-date, driven by increased investor confidence in the profitability of its offshore support vessel business. • The company's strengthened balance sheet with a core chartering profit of RM23.2 million in 1Q 2026 -- and net profit of RM79 million (+160%) on vessel disposal gains -- has led to DBS Research maintaining its $1.90 target price for the stock. Nam Cheong's shift toward long-term charter contracts, which now represent 71% of its 35-vessel fleet, provides revenue visibility for the next few years. That said, geopolitical issues in the Middle East have led to higher operating costs and insurance premiums even as its vessels remain active in the region. • Looking ahead, oil majors are experiencing project delays in the Middle East and a massive backlog of projects across Malaysia, Thailand, and Indonesia, which could lead to Nam Cheong enjoying higher charter rates by 2027 and 2028. • Should charter rates rise, say, 20-30%, this could spur a new cycle of vessel construction, which would benefit Nam Cheong's shipyard. Already, inquiries from ship owners are high—especially for deepwater subsea vessels. |
Excerpts from DBS report
Analyst: Ho Pei Hwa
▪ 1Q26 reported net profit surged 160% y/y to RM79mn on vessel disposal gain
▪ Vessel utilisation at 58% in 1Q26 due to monsoon season, set to improve to >70%in 2Q and 3Q; plan to add 5 vessels to fleet in 2026; net gearing declined sharply to 0.17x ▪ Maintain BUY and TP SGD1.90; well-positioned to benefit from multi-year O&M upcycle |
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| Results Review |
Nam Cheong saw PATMI rising 160% y/y to RM78.9mn in 1Q26, driven by vessel disposal gains.
Revenue grew 1% y/y to RM117.9mn despite a smaller fleet, as utilisation increased to 58% (vs 48% in 1Q25) following the commencement of more long-term charters.
Stripping out vessel sale net gain of ~RM55mn, core chartering net profit came in slightly below expectations, declining ~23% y/y to RM23.2mn with gross margin moderating 6ppt to 42% due to higher operating costs for vessels deployed in the Middle East amid heightened geopolitical tensions, while higher share-based compensation lifted administrative expenses.
Balance sheet strength improved further, with net gearing falling to 0.17x from 0.27x in the previous quarter following continued debt repayment and stronger cash collections.
 Ho Pei Hwa, analystVessel utilisation is expected to improve further in 2Q26 following the end of the monsoon season, supported by firm offshore demand and tight OSV supply conditions across the region. The addition of five vessels during the remainder of 2026, alongside maiden revenue contribution from the shipbuilding segment in 2Q26, should further enhance earnings visibility and diversify revenue streams. In addition, the group will also recognise another ~RM50mn vessels disposal gains in 2Q26. Against the backdrop of heightened energy security concerns, sustained offshore spending by PETRONAS and an ageing global OSV fleet, Nam Cheong remains well-positioned to benefit from a multi-year offshore and marine (O&M) upcycle while maintaining capital discipline and ongoing deleveraging momentum. Maintain BUY and TP SGD1.90 (12x FY26PE). |
→ See also:NAM CHEONG: 70% of Fleet on Long-Term Charters, Analyst Target Prices At 10-11x PE
