With Opec+ expected to maintain production increases while the global offshore support vessel (OSV) fleet with an average age of 15 to 16 years nearing a replacement cycle, Ho expects Nam Cheong to be well-positioned to seize opportunities from the offshore upcycle. Combined with a “buoyant” OSV resale market, she believes the signs are promising for more newbuild orders.
Revenue-wise, Ho projects this contract to contribute 3-8% to FY2026-2027 earnings. In her report, Ho assumes a construction period of 18 months and “conservative” net margin of 8% to 10%, which would represent contributions of RM7-8 ($2.3-$2.6) million and RM13–17million to FY2026 and FY2027 group net profit respectively. DBS will include these earnings accretions post-FY2025 results announcement which is due Feb 27.
For full-year FY2025, Ho expects Nam Cheong to report RM42 million in net profit for the seasonally weaker 4Q due to the monsoon season. However, she believes there could be potential upside if fleet utilisation exceeds its “prudent” 65% assumption.
Ho expects milestone payments for the new projects and Nam Cheong to be able to finance the project. She notes that Nam Cheong has accelerated debt repayment over the past year, halving its over RM500 million restructured debt from early 2024 to approximately RM280 million by 1Q2026.
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With the lower debt burden coupled with strong cash flow from steady charter income, Ho is hopeful of dividend resumption, with the endorsement of lenders.
At a target price of $1.60 per share, Ho values Nam Cheong shares at 10 times FY2026 forecasted P/E.
Meanwhile, describing the newbuild contract as “larger-than-expected”, Meghana Kande and Lim Siew Khee from CGSI are maintaining their “add” rating at an unchanged target price of $1.87.
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Both analysts expect construction for the newbuild vessels to start from mid-2026 while noting that Nam Cheong is building six vessels — three scheduled for completion by 1Q2026 and the other three by 4Q2026.
Under the assumption of percentage-of-completion revenue recognition, CGSI forecasts this newbuild contract to contribute revenue of around RM50 million, RM175 million and RM25 million for FY2026, FY2027 and FY2028 respectively.
Pointing out the advanced features of the vessels, CGSI believes that gross margins for the contract are in the mid-teens and would have a “positive” impact of 3-4% on FY2027 forecasted core net profit. Kande and Lim also brought up what Nam Cheong’s management said in January 2026 at CGSI’s ValueUp conference — the company is aiming to secure orders for complex vessels that earn higher margins while enabling it to develop its shipbuilding technological bench strength.
Noting that Nam Cheong has earmarked proceeds of US$20.5 ($25.9) million from the sale of a vessel in December 2025 towards shipbuilding activities, the analysts believe with project milestone payments, Nam Cheong should be able to fund the working capital for this contract,
With stronger-than-expected newbuild orders as a key re-rating catalyst in its January 2026 initiation report, CGSI maintains its “add” call on Nam Cheong, confident in the company’s strategic position as a ship charterer with a young fleet and as a shipyard poised to seize opportunities in the global newbuild upcycle.
Valuing Nam Cheong at 11 times of forecasted 2027 P/E, CGSI’s target price of $1.87 is roughly 25% below peers’ average.
Shares in Nam Cheong closed at $1.37 on Feb 25, down six cents or 4.2% from the previous day.
