NAM CHEONG: Touches 2-year high following CGS' and DBS' bullish notes

CGS initiated coverage on Nam Cheong with an ADD call and a target price of S$1.87.

Analysts Meghana Kande and Lim Siew Khee view Nam Cheong as a company at an inflexion point, shifting from recovery to growth.

The "Dual-Engine" Growth Story: CGSI frames Nam Cheong as a "dual-engine" play involving both vessel chartering and shipbuilding.

"We think a replacement-driven cycle for newbuild OSVs bodes well for NCL’s yard business, which handled peak orderbooks of more than RM1bn in FY12-15. NCL’s comments at its 3Q25 analyst briefing and our ValueUp conference in Jan 2026 signal active discussion for newbuild orders, particularly from customers outside Malaysia." -- Meghana Kande (photo) & Lim Siew Khee, analysts

The analysts argue that "fleet expansion, better utilisation and potential newbuild order wins underpin our estimated 12% core net profit CAGR over FY25F-27F".

They point to Nam Cheong constructing six vessels for its own fleet—three geotechnical vessels and three Fast Crew Boats—scheduled for completion in 2026.

These additions "can add c.RM75m in annual revenues, contributing 5-7% pts of revenue growth in FY26F-27F".

Reviving the Shipyard: A key differentiator in the CGS report is their forecast for the return of external shipbuilding revenue, which has been absent since 2020.

The report highlights that management is in "active discussion for newbuild orders, particularly from customers outside Malaysia".

CGS has priced this recovery into their model: "We forecast 2 third-party newbuild orders worth a total US$30m (RM120m) in 2026F for delivery in 2028F".

They view the potential announcement of these orders as a re-rating catalyst, as it would signal the successful reactivation of Nam Cheong’s Miri yard for external clients.

Operational Recovery and Deleveraging: The analysts also focus on the normalisation of fleet operations. While utilisation dipped in the first half of FY25 due to vessel preparation for long-term charters, CGS sees "scope for fleet utilisation to reach 68%/70% in FY26F/27F" as vessels begin their long-term contracts.

Furthermore, they highlight the rapid strengthening of the balance sheet, projecting that "net gearing is expected to drop significantly to 12% by FY27F," driven by asset sales and operating cash flow.

DBS Group Research reiterated its BUY rating in a report dated 29 January 2026, raising its target price to S$1.60.

DBS analyst Ho Pei Hwa described Nam Cheong as an "undervalued gem" trading at an unwarranted discount to its peers.

The "Youngest Fleet" Competitive Moat: "Nam Cheong operates a fleet of 38 mid-sized offshore support vessels (OSVs) with an average age of just over eight years," she states.

"Potential multi-bagger. Nam Cheong is trading at only ~7x FY26 PE, an unwarranted, steep discount of 20%-50% to closest peers such as Singapore-based Macro Polo (16x PE), Pacific Radiance (10x), ASL Marine (9x) and Malaysia-based Lianson (22x)." -- Ho Pei Hwa, analyst

The analyst emphasises that this "represents a strong competitive advantage, as peer fleets average 13-15 years of age".

The Hidden Asset: Miri Shipyard: DBS values the shipyard as an asset waiting to be recognised by the market. The current valuation "does not reflect the potential valuation of its Miri Shipyard".

The shipyard could generate "RM20–200mn earnings optionality as replacement cycle accelerates".

The analyst suggests this overlooked asset "could add SGD0.13-1.15/share" to the company's fair value once the newbuild cycle fully materialises.

Dividend Resumption and Asset Monetisation: DBS is particularly bullish on the return of shareholder capital. The recent vessel sales have crystallised significant value, with vessels held on the books at "<50% of market value".

Driven by accelerated debt repayment which has seen total restructured debt halve from RM495m to less than RM280m, DBS sees high probabilities of a dividend comeback.

"A conservative 20–30% payout on FY26F net profit... translates to 2.6–3.9 Scts/share (2.5–3.5% yield)," the analyst calculated, identifying this as a major catalyst for the stock.

See the DBS report and CGS report.