The first few years after Nam Cheong made its trading debut on the Singapore Exchange in 2011 have been nothing short of remarkable for the builder of offshore support vessels (OSVs).

While it had already made a name for itself in Malaysia in the 1980s, the company progressed to solidify its position as the second-largest OSV builder in the world shortly after going public in 2011.

From RM606 million in 2011, revenue more than tripled to RM1.9 billion in 2014. By then, virtually every major OSV operator in Malaysia was a customer of Nam Cheong. Beyond Malaysia, it also saw brisk demand for its vessels from the Middle East, West Africa and Europe to as far as Latin America.

With oil prices elevated and exploration budgets plentiful at the time, the company’s so-called build-to-stock business model — building OSVs ahead of confirmed orders — paid off handsomely. Customers who needed vessels quickly could buy and deploy them at short notice. 

All that unravelled, however, when oil prices collapsed in 2014-2015. With oil majors slashing exploration and production budgets, orders for OSVs dwindled. Before long, Nam Cheong was caught with yards full of unsold vessels and crippling debts — a situation many shipbuilders with a similar business model found themselves in. 

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By 2017, it was forced into a painful restructuring. Creditors ended up taking shares for debt settlement, and shareholders saw their stakes slashed. Nam Cheong, once valued at over $1 billion, was reduced to a penny stock.

The downturn was a turning point that forced Nam Cheong to rethink its entire operating philosophy. With its speculative build-to-stock model shattered, it opted to focus on vessel chartering, a business it quietly started in 2007. 

Unsold vessels from its shipbuilding business were added to its fleet for chartering to create a sustainable income stream. That strategic shift proved prescient. Today, chartering is not only Nam Cheong’s backbone but also its main growth engine, growing its core profit from chartering to RM239.4 million ($74.7 million) in 2024 and making the company the largest OSV provider in Malaysia as well as one of the biggest in Southeast Asia. 

“Our vessel chartering segment has been contributing 100% to our revenue since 2021, providing a steady and recurring stream of income,” says CEO Leong Seng Keat.

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As of end-1H2025, Nam Cheong operates 38 vessels, of which 23 are on long-term charters. Roughly half of these contracts run for three years or more, locking in visibility even as spot charter rates fluctuate.

“We aim to have about 70% of our fleet under long-term contracts to ensure stable earnings, while keeping the remaining 30%open to capture market upsides,” says Leong. “This diverse mix ensures steady cash flow and reduces exposure to short-term market fluctuations.”

The company’s OSVs are the youngest and most advanced in Malaysia. Customers include the country’s largest oil and gas producers, many of whom have worked with Nam Cheong for years. 

“Our long-standing relationships with top-tier clients, including major oil and gas companies, provide valuable insights into market trends and help us align our services with evolving client needs,” says Leong. 

Opportunities in a tightening market

Industry dynamics are now tilting in Nam Cheong’s favour. Supply growth of new OSVs has been sluggish in recent years, with banks reluctant to finance newbuilds and environmental, social and governance (ESG) requirements further tightening credit access.

“Access to bank financing remains limited mainly due to the lack of multi-year charters and ESG compliance requirements. As a result, the supply of new vessels has remained tight,” adds Leong. 

The global OSV fleet is also ageing rapidly. The average age of anchor-handling tug supply and platform supply vessels is around 15 to 16 years, while the typical retirement age is about 20 years. This means supply constraints are expected to persist, underpinning charter rates. 

As oil companies continue to push exploration and production targets, notably in Malaysia, where Petronas is committed to sustaining two million barrels of oil equivalent per day through 2026, OSV demand is expected to remain buoyant. 

Amid the growing momentum, Nam Cheong is keeping a close watch on developments involving its key customer Petronas. Malaysia’s national oil company has been under pressure from Sarawak’s state energy firm Petros, which wants greater control of local oil and gas resources. 

“Amid the ongoing discussion surrounding the roles of Petronas and Petros in Sarawak, vessel demand for selective types of vessels, such as accommodation units, is experiencing more impact,” says Leong. 

“This situation is best understood as a timing shift rather than a reduction in activity. Project work and associated vessel requirements are anticipated to be fulfilled in later phases once regulatory clarity emerges.”

In other words, production-supporting OSVs remain in steady demand, while project-related vessels may face temporary delays. Nam Cheong believes this will be resolved over the medium term. 

Even potential oil production hikes by OPEC+ are unlikely to dent the uptrend, says Leong. “The production increases by OPEC+ are expected to boost offshore oil and gas activities, driving OSV demand and charter rates amid the industry-wide supply shortage.” 

At the same time, Nam Cheong sees new frontiers opening up. “We are actively diversifying our charter revenue streams to expand into new geographical areas such as the Middle East, while venturing into emerging sectors like renewables and telecommunications,” he says. 

Nam Cheong’s vessels are capable of supporting subsea cable-laying and offshore windfarm activities — capabilities that align well with Asia’s growing green-energy infrastructure build-out.

“The biggest opportunity for Nam Cheong lies in the growth of offshore oil and gas activities in the Middle East and Vietnam, as well as offshore windfarm and telecommunication projects in Asia,” Leong says. “As countries strive to meet climate goals, demand for specialised vessels is expected to surge.”

Not giving up on shipbuilding

Despite its transformation into a chartering-led group, Nam Cheong has not walked away from its shipbuilding roots. It still maintains a minimum level of shipbuilding activity in its Sarawak yard. 

It anticipates a resurgence in newbuild orders as global offshore energy activities pick up, driven not only by traditional oil and gas projects but also by offshore renewables and the ageing of existing OSVs across the industry.

The average age of OSVs worldwide will soon approach the 20-year limit set by some oil majors, notes Leong. “That will render many vessels ineligible for chartering. This is expected to cause an acute surge in demand for newbuilds, presenting a golden opportunity for OSV builders like us.”

Interestingly, US tariffs and fees on Chinese-built-and-operated ships could also tilt the playing field. “This presents a positive development for Nam Cheong,” he adds. 

“None of the OSVs we delivered have been deployed in the US, so the proposed port fees have no direct impact. Instead, it may create more opportunities for us as customers look to build vessels outside China.”

A stronger balance sheet

One of the most striking aspects of Nam Cheong’s revival story is how much stronger its finances are today compared to the pre-crisis years. Under its seven-year debt restructuring master agreement, concluded in 2024, the company has methodically deleveraged and rebuilt its capital base.

As of end-1H2025, its net gearing was about 57%, a level it deems healthy. “Our approach to gearing is flexible and aligned with maintaining financial resilience and operational stability,” Leong says. “The focus remains on prudent balance sheet management to support ongoing fleet deployment, long-term charter coverage, and strategic growth initiatives.”

Those efforts are paying off. The group has returned to profitability, generating sustainable cash flows from chartering while waiting for the right time to re-enter shipbuilding more aggressively.

Even as the company rebuilds, Leong remains realistic about the global uncertainties ahead. Nam Cheong’s guiding philosophy now emphasises agility and prudence, he says. 

“We’re constantly reprofiling our fleet by adding new vessels and disposing of those that are less competitive. This ensures our fleet remains relevant, competitive and in demand.”

A measured approach is also evident in its business mix. After the painful lessons of 2014-2017, Nam Cheong no longer chases speculative opportunities. “As build-to-stock carries a higher risk profile, our board now prefers the build-to-order approach to balance growth with prudent risk management,” he says.

Steady course, clearer horizon

Nam Cheong’s turnaround over the past decade has been hard-won. From a shipyard once teetering on the brink of collapse, it has reinvented itself as a leaner, more disciplined player anchored by recurring charter income and supported by a sounder balance sheet.

Its message to shareholders is one of confidence and strategic foresight. “Despite the difficulties of recent years, we have demonstrated remarkable resilience and progress, as evidenced by our record-breaking charter wins and significant revenue growth,” Leong says.

The focus now is to sustain this growth trajectory. The company that once rose — and nearly imploded — with oil prices is now charting a more predictable course, grounded in operational discipline rather than market exuberance. Its rebound marks a fundamental recalibration of how value is built and sustained in a cyclical industry.