NAM CHEONG +42% YTD: Why DBS Still Sees It as a Buy with $1.90 Target

Bloomberg code:  NCL_SP_Equity

Newbuild Sale Signals Tightening OSV Market

• Sold newbuild Geotech vessel and 16-year old 120T AHTS for USD36.7mn, both delivered in 2Q26
• Estimated disposal gains of ~RM60mn proceeds to be redeployed into shipbuilding for 3rd  party sales or own fleet expansion
• Positive OSV market indicator ~3-4% recurring income loss potentially more than offset by newbuild growth
• Augmented balance sheet, prime proxy to upcoming OSV newbuild wave Reiterate BUY TP lifted to SGD1.90 (higher PE of 12x vs 10x previously)

First newbuild sale in over a decade.  Nam Cheong (NCL) made another breakthrough with the first sale of a newbuild OSV in a decade. This involves one of the two newbuild multi-purpose support vessel (also referred to as Geotech vessels) the group was building last year. In addition, it also sold a 16-year-old 120-tonne AHTS vessel, in line with its fleet reprofiling strategy. The two disposals have a combined value of c.USD36.7mn and both were delivered in 2Q26 to operators in Indonesia and Egypt (government-linked). Net proceeds will be primarily redeployed to support the group' s shipbuilding activities, either for external third-party sales or strategic fleet expansion depending on market opportunities. NCL&rsquo s net gearing has improved dramatically from 0.6x in FY24 to 0.3x in FY26 and est. < 0.1x as of Apr-2026, halving restructured debt to Rm280m in just over 2-years. 

Augmented balance sheet OSV newbuild revival underway.  We estimated that both sales bring about disposal gains of approximately RM60mn in total. While the disposal results in a modest ~3-4% reduction in recurring charter income, this is more than offset by the potential for newbuild activities. The transaction validates improving OSV fundamentals and positions Nam Cheong to capitalise on the emerging newbuild cycle, supporting our reiterated BUY rating with target price raised to SGD1.90 (based on 12x PE, from 10x previously). Stock has done well and we believe the rally has further legs, as a high oil price environment and rising energy security concerns continue to drive demand for O& G infrastructure, including storage terminals and production related facilities. Our current forecasts have only factored in four newbuild projects announced earlier this year, and further newbuild wins would prompt earnings upgrades and share price re-rating.