Nam Cheong Limited: 1H2025 Financial Results Review and Outlook

Nam Cheong Limited, a Malaysia-based shipbuilding and vessel chartering company, has released its unaudited condensed interim financial statements for the six months ended 30 June 2025. This review provides a detailed analysis of the company’s key financial metrics, performance trends, and outlook for investors.

Key Financial Metrics

^*Assumed as 2H2024; actual quarter-on-quarter figures not provided, so the previous half-year is used as the proxy.

Performance and Financial Trends

• Revenue: Revenue fell 11% YoY to RM278.2 million, entirely from the vessel chartering segment, as the shipbuilding segment recorded no revenue in both 1H2025 and 1H2024. The decline was mainly due to lower vessel utilisation during the period.
• Gross Profit: Gross profit decreased by 3% YoY to RM141.3 million. However, gross margin improved to 51% (up from 47%), attributed to lower vessel maintenance expenditure.
• Net Profit and Exceptional Items: Net profit dropped sharply by 86% YoY to RM89.9 million. The prior period benefited from an exceptional gain on waiver of debts (RM390.6 million) following a debt restructuring scheme. Excluding such exceptional items and other income, core profit rose 1% YoY to RM80.4 million.
• Other Income: Other income was RM6.3 million, compared to RM537.7 million in 1H2024, which was inflated by one-off gains linked to the restructuring.
• EPS: Diluted EPS for the half-year was 19.73 sen, down 87% YoY, reflecting the absence of exceptional restructuring gains.
• Dividend: No dividend was declared for 1H2025 or the corresponding period last year as the company continues to focus on restructuring and enhancing its financial position.

Balance Sheet and Cash Flow Highlights

• Total Assets: Increased marginally by 1% to RM1,292.9 million. The rise is mainly due to higher property, plant and equipment (from dry docking and retrofitting) and higher inventories (vessels under construction), offset by lower cash and bank balances due to debt repayments.
• Total Liabilities: Fell by 11% to RM630.3 million, reflecting repayments of borrowings and a reduction in trade payables.
• Net Cash Flows:
  • Operating activities generated RM25.3 million, mainly from customer collections.
  • Investing activities used RM21.3 million, largely for vessel-related capex and repayments to joint ventures.
  • Financing activities used RM68.0 million, mostly for loan repayments.
• Net Asset Value (NAV) per Share: 167.3 sen (1H2025), up from 146.1 sen at end-FY2024.

Corporate Actions and Restructuring

• Debt Restructuring: In March 2024, the group completed a major debt restructuring under a court-sanctioned scheme, including the issuance of new shares to creditors and interested parties, repayment of debts, and extension of loan maturities.
• Share Capital: The company issued 2,941,900 award shares in April 2025 under its management incentive plan. No dividends or share buybacks were announced.
• Related-Party Transactions: Routine transactions were minimal, and no significant new related-party risks were disclosed.

Outlook and Chairman’s Statement

“The global economic outlook for 2025 continues to remain uncertain amid trade tensions driven by U.S. tariff policy. Concerns over a potential economic slowdown have added caution to oil price forecasts, creating a more measured sentiment across the energy markets, which has also prompted the cut in 2025 budget by some of the oil majors. The local OSV market continues to face structural supply constraints. While the existing fleet is ageing, new vessel construction remains subdued, primarily due to banks’ continued caution in extending financing for newbuild programs. Malaysia’s cabotage policies, which limit foreign vessel participation, further restrict available supply. As a result, OSV charter rates are expected to remain well supported in 2H2025. Backed by a modern fleet and steady progress in securing long-term charters, the Group is well-positioned to meet market demand and fully participate in the long term regional offshore marine growth trajectory.”

The Chairman’s tone is cautiously optimistic, pointing to a supportive market for offshore support vessels (OSVs) due to supply constraints, even as macroeconomic and oil price uncertainties remain.

Dividend Policy

No dividends were declared in the current or previous periods. The company states that it is still enhancing its financial strength post-restructuring and has prioritized balance sheet repair over shareholder payouts.

Conclusion and Investment Recommendation

Overall Assessment: Nam Cheong’s 1H2025 results reflect a normalization following last year’s exceptional debt restructuring gains. While headline profits dropped sharply, core operating performance was steady, with gross margins improving and core profit slightly up. The balance sheet is gradually strengthening, and the company is benefiting from supportive OSV charter rates due to market supply constraints.

• If you are currently holding the stock: Consider maintaining your position. The company has completed a major restructuring, improved its gross margin, and the sector outlook is stable with potential for higher charter rates. However, be aware that dividend resumption may take some time, and earnings may remain volatile due to macro risks.
• If you are not holding the stock: It may be prudent to monitor Nam Cheong for further consistent operating improvements and signs of resumed dividends before entering. The risk-reward profile is improving, but the absence of a dividend and sensitivity to oil market conditions warrant some caution for new investors.

Disclaimer: This analysis is based strictly on information disclosed in Nam Cheong Limited’s 1H2025 financial report and should not be construed as investment advice. Investors should conduct their own due diligence and consider their risk tolerance before making investment decisions.

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