• The stock of Nam Cheong, the largest owner of Offshore Support Vessels in Malaysia, jumped 9% to $1.18 this morning on news of it selling its second vessel in 2 months. • The investor bullishness is supported by increasing clarity on the hidden value of Nam Cheong's fleet, and its ability to monetise it. • With a greater inflow of cash, DBS Group Research figures that Nam Cheong will accelerate its debt repayment and progress towards a resumption of dividend payments for shareholders.  • While Nam Cheong disposes of older vessels, it builds new ones at its own Miri, Sarawak shipyard, expanding or refreshing its fleet at a significantly lower cost basis compared to other operators who are deterred by the high price of newbuilds. In recent times, Nam Cheong has received numerous inquiries for newbuilds from third parties, signalling a potential revival of newbuild orders and a furthe re-rating of the stock. •Nam Cheong has enjoyed elevated charter rates in 2024 and 2025 owing to an acute supply-demand imbalance because there has been minimal newbuilding for over a decade. Below is the DBS news analysis of the latest vessel sale ... |
DBS Group Research note
Analyst: Ho Pei Hwa
• Second PSV sale in two months underscores booming resale/newbuild OSV market and supports our constructive view on Nam Cheong (NCL) • Expect c.RM50mn disposal gain in 1Q26 (upper end of historic RM30-50mn p.a. disposal gains), not factored into our core earnings • Proceeds accelerate deleveraging (potentially >RM100mn debt repayment in FY26F), support fleet rejuvenation (maintained at ~9-year old), and increase odds of dividend resumption • Scope to revise our S$1.25 TP (8x FY26E PE) higher on both earnings from chartering of two idling workboats and newbuild orders as well as valuation multiple. |
Robust OSV resale and newbuild markets. Nam Cheong is disposing an 11-year-old 3,000 DWT platform supply vessel (PSV) to an Indonesian customer for USD19.8mn, following the December 2025 sale of a larger 4,000 DWT PSV to a Vietnamese buyer for USD20.5mn.
The latest disposal is part of management’s fleet reprofiling and capital recycling strategy, monetising older tonnage (11 years vs c.9-year fleet average) at robust market valuations, with most of the cash earmarked for debt repayment.
Accelerating debt repayment. We estimate the transaction will crystalise c.RM50mn disposal gain in 1Q26 (vs historic RM30-50mn p.a. disposal gains over the last four years), effectively pulling forward roughly seven years of charter earnings (c.RM7mn net profit p.a.) and highlighting how deeply undervalued Nam Cheong’s PSV fleet remains on book (at least 50% below current market levels).
Together with an accelerated deleveraging trajectory (debt repayments rising from RM35mn in FY24 to >RM78mn in FY25E and potentially >RM100mn in 2026E), this should strengthen the balance sheet (net gearing trending from ~0.5x towards <0.4x), pave the way for dividend resumption, and reinforce our positive view ahead of OSV newbuild awards and redeployment of the idle workboats/AHTS, supporting earnings upgrades and a potential upward revision to our S$1.25 TP (8x FY26F PE).
 Ho Pei Hwa, analystTogether with an accelerated deleveraging trajectory (debt repayments rising from RM35mn in FY24 to >RM78mn in FY25E and potentially >RM100mn in 2026E), this should strengthen the balance sheet (net gearing trending from ~0.5x towards <0.4x), pave the way for dividend resumption, and reinforce our positive view ahead of OSV newbuild awards and redeployment of the idle workboats/AHTS, supporting earnings upgrades and a potential upward revision to our S$1.25 TP (8x FY26F PE). |
See also: Upcoming Rise of Newbuilds: NAM CHEONG's Latest Move Boosts BUY Case For $1.25 Target
