Nam Cheong Limited Q3 2025 Financial Analysis: Navigating Recovery and Sector Headwinds

Nam Cheong Limited, a key player in Malaysia’s offshore support vessel (OSV) industry, has released its unaudited condensed interim financial statements for the nine months ended 30 September 2025. This report provides a comprehensive analysis of the Group’s financials, trends, and outlook, with actionable insights for investors.

Key Financial Metrics and Performance

9 Months Cumulative Performance

Historical Performance and Noteworthy Trends

• Revenue and Profitability: Both revenue and gross profit saw a 12% YoY decrease for the nine months ended September 2025, primarily due to lower vessel utilisation in the chartering segment. Net profit dropped significantly (by 80%) due to the absence of exceptional income from debt waivers and asset disposals that boosted 2024 results.
• Exceptional Items: The previous year’s results were heavily inflated by a RM393.4 million gain on waiver of debts and a RM31.5 million gain on disposal of property, plant and equipment, both of which were not repeated in 2025.
• Margins: Despite lower revenue, the gross profit margin remains solid at 51% (unchanged YoY), indicating resilient core operating performance.
• Expenses: Selling and administrative expenses rose 15% YoY, mainly from higher staff costs. Other operating expenses also increased due to a litigation settlement, partially offset by the absence of restructuring costs.
• No Dividends: No dividends were declared for Q3 2025 or the nine months, in line with ongoing restructuring and the need to preserve cash.

Balance Sheet and Cash Flow Review

• Assets: Total assets increased by RM51.0 million since end-2024, mainly due to higher inventories (vessels under construction) and additions to property, plant, and equipment.
• Liabilities: Total liabilities decreased by RM82.5 million, primarily from lower borrowings and a reduction in trade and other payables.
• Cash Flow:
  • Net cash from operating activities for 9M 2025 was RM28.2 million, reflecting healthy collections from customers.
  • Investing activities consumed RM26.6 million (mostly for vessel upgrades and repayments to joint ventures), while financing activities used RM75.1 million (debt repayments).
  • Net cash decreased by RM73.5 million over nine months, mainly due to debt and trade payable repayments.

Corporate Actions, Restructuring, and Other Material Events

• Debt Restructuring: The Group completed a major debt restructuring in March 2024, including the issuance of conversion, settlement, and placement shares under the 2024 Scheme. Debt maturities were extended, and payment terms reset to support operational recovery.
• Share Issuance: Significant dilution occurred in 2024 due to share issuances to creditors and for private placements. An additional 2.9 million award shares were issued in April 2025 as part of a management incentive plan.
• Legal and One-off Expenses: Other operating expenses in 2025 include a litigation settlement, but no further restructuring charges were incurred this year.
• Related-Party Transactions: Purchases and rental expenses with related parties are disclosed, but not material relative to Group size.

Industry and Macroeconomic Outlook

The Group highlights ongoing structural supply constraints in Malaysia’s OSV sector. A lack of new vessel construction, cautious bank lending, and supportive cabotage policies are expected to keep charter rates firm into 2026. OPEC’s continued production increases, together with more global economic certainty, suggest stable demand for Nam Cheong’s services.

Chairman’s Statement

“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 2026.

Equipped with the largest and the most advanced OSV fleet on Malaysian waters, capable of supporting both production and exploration projects, the Group remains cautiously optimistic about its long-term growth prospects and will continue to stay agile in capturing emerging opportunities.

Progressing through 2H2025, increased clarity on U.S. tariff policies has helped create more certainty and confidence towards the global economy. The Organisation of the Petroleum Exporting Countries (“OPEC”) oil output continued to rise steadily, reaching 28.43 million barrels per day in October 2025, up 30,000 bpd from September 2025.”

Tone: Cautiously optimistic with a focus on operational strength and external market support.

Conclusion and Investment Recommendation

Performance Assessment: Nam Cheong’s core business remains profitable with a stable gross margin, even as revenue and net profit declined due to lower vessel utilisation and the absence of exceptional one-off gains recognized in 2024. The company’s balance sheet is healthier post-restructuring, but cash reserves have fallen as borrowings and payables were paid down. No dividends have been declared as management focuses on financial strength and operational resilience.

• If you are currently holding the stock:
  Maintain a hold position. The company’s fundamentals are stable post-restructuring, and the sector’s supply-demand dynamics remain favorable. However, near-term upside is limited by lower vessel utilisation and the lack of dividend payouts. Monitor for signs of improving utilisation rates or new contract wins before considering increasing exposure.
• If you are not currently holding the stock:
  Adopt a wait-and-see approach. While the restructuring is complete and sector prospects are constructive, the company’s recent profitability has been driven by one-off items. Wait for evidence of sustained operational improvement or a resumption of dividends before entering a position.

Disclaimer: This analysis is based solely on information provided in Nam Cheong’s Q3 2025 financial report and does not constitute investment advice. Investors should conduct their own due diligence and consider their own financial situation and risk tolerance before making investment decisions.

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