The company's fleet is on average just nine years old, which makes the ships more attractive to the industry average of 14 to 16 years.
Besides multi-year contracts providing earnings visibility, there are also ships available for spot charters, which means Nam Cheong can capture near-term upside as well.
Also, following years of under-investment in new ships because of the downturn, there is now greater demand for vessels as the industry is now on an upcycle. Newer vessels, in particular, are in demand as indicated by the pick-up in resale activity.
Of course, customers are placing orders for new ships too. Nam Cheong, for one, was recently given a US$64.5 million contract to build four offshore support vessels.
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"We believe that the growing appetite for younger builds could revitalise activity at Nam Cheong’s Miri shipyard, which has the capacity to build up to 12 vessels per year," says Syahri.
Referring to an ongoing dispute between Petronas and Petroleum Sarawak, Syahri is of the view that Nam Cheong is unlikely to face material disruption.
According to the analyst, Sarawak’s offshore activity is expanding moderately as the state works to open more offshore areas for exploration, which will drive greater demand for offshore support vessels.
As a Sarawak-based operator, Nam Cheong is naturally aligned with this growth and well-positioned for state‑led offshore developments.
At the same time, Nam Cheong maintains established commercial ties with Petronas, the national oil company.
"With Sarawak’s rising strategic importance and Nam Cheong’s deep regional roots, the group remains well buffered against regulatory uncertainty," reasons Syahri.
Other key re-rating catalysts, according to the analyst, include exposure to the renewable energy market, such as offshore wind energy, its new geo-tech vessels that come with a variety of enhanced features, and accelerated debt repayment that could be sped up through potential future vessel sales, which can help lower financing costs.
Syahari expects Nam Cheong to record a three-year core earnings CAGR of 15%, mainly driven by its chartering segment with stable vessel utilisation and charter rates, gradual fleet expansion, and balance sheet deleveraging.
His target price of $2.05 is based on 11x FY2027 earnings, in line with its regional peers.
Nam Cheong shares as at 3.44 pm, gained 7.35% to trade at $1.46.
