Firstly, they expect Nam Cheong’s fleet of offshore support vessels (OSV) to enjoy better utilisation rates to around 68% for FY2026 and 70% FY2027, bringing in more cash from chartering. They also note that around 64% of its current 36-strong OSV fleet is under long-term charter, signalling earnings visibility. Both are also optimistic that the six vessels under construction could add 5% to 7% of revenue growth or around RM75 million annually.
Next, Kande and Lim believe that Nam Cheong is well-positioned to seize newbuild OSV opportunities as global OSV fleets age and incur higher maintenance costs and become less efficient. They point out that Nam Cheong handled peak orderbooks of more than RM1 billion from FY2012 to FY2015 as well as management’s hints that the company is in active discussion for newbuild orders. The use of proceeds from a December 2025 sale of a vessel for shipbuilding capex also reaffirms CGSI’s view of Nam Cheong’s opportunity in this segment, with CGSI forecasting two newbuild contracts worth US$30 million in FY2026 for delivery in 2028.
Thirdly, both analysts are positive on Nam Cheong’s efforts to pare debt. They forecast net gearing to decrease to 20% in FY2026 before decreasing further to 12% in FY2027. With lower finance costs and the unlocking of liquidity from the sale of older vessels, Kande and Lim believe Nam Cheong will have the flexibility to fund growth initiatives and potentially resume dividends.
Should newbuild orders or vessel utilisation exceed expectations, or dividends resume, CGSI would view these as catalysts for a rerate. They remain watchful for downside risks including lower fleet utilisation arising from decreased capex by oil majors and delays in securing newbuild contracts.
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In summary, CGSI is confident in Nam Cheong’s business as a ship charterer and builder. They believe at around seven times P/E, the counter is undervalued. Their valuation of $1.87 is based on a forecasted FY2027 P/E of 11 times, in line with peers.
At around 4:30 pm on Feb 2, Nam Cheong shares are trading at $1.28, an increase of nine cents or 7.6% from the previous trading day.
