The East Malaysian state holds about 60% of the country’s gas reserves and accounts for nearly 90% of its LNG exports. It has established the Sarawak gas roadmap which aims to increase domestic gas usage from 7% to at least 30% by 2030.
However, the initiative seems to have lost momentum, with Petronas cutting capex by around 20% to RM43 billion in 2025 due to the state’s gas overhang and oil price moderation.
DBS notes that the Petros-Petronas pact will be a “breath of fresh air”, offering “regulatory certainty and strong support for upstream investments in the region” and “reigniting upstream investment momentum and demand” for offshore assets.
If the agreement is indeed finalised by year-end, Malaysian offshore support vessel (OSV) supplier Nam Cheong is well-positioned to capitalise on renewed appetite for offshore assets. Propelling the counter’s growth include two idling OSVs which would likely be in demand once upstream activity revitalises, adding 7% to 8% to group profit, says DBS in a Dec 3 note.
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The report adds that the shipyard, capable of handling six to eight OSVs at any one time, is key to growth, with one newbuild order adding 2% to 3% to earnings and fair value.
DBS has not factored in the afore-mentioned potential earnings drivers into its FY2026 forecast, although it predicts they would add 10% to 20% to FY2026 bottomline.
At a TP of $1.25 or eight times forecasted FY2026 earnings, DBS highlights Nam Cheong as an “undervalued OSV gem” because it is trading at only five times earnings. Despite steady income streams that are 60% to 70% backed by long-term charters, DBS points out that the counter “remains unwarrantedly undervalued” relative to peers ASL Marine (nine times P/E), PACRA (10 times P/E) and Marco Polo Marine (14 times P/E).
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Based on the above factors, DBS suggests that a rerating is on the cards, writing, “We believe potential newbuild orders and the redeployment of idling vessels in 1Q26, especially with Sarawak gas resolution, to drive share price re-rating after a relatively muted earnings growth in 2025.”
Nam Cheong closed two cents or 2.5% down to 78.5 cents on Dec 2. The counter reached a year high of 87.5 cents on Nov 20.
