Nam Cheong’s 80% Profit Plunge: Four Reasons It’s Actually Great News

Introduction:

Buried within the tables and footnotes of Nam Cheong’s latest Q3 2025 report is a compelling story—one of deliberate strategic shifts, favorable market dynamics, and a surprising degree of resilience.

This isn’t just about revenue and profit. It’s about a company successfully navigating a complex transition. We’ll explore four key takeaways from the latest data that cut through the noise and reveal what’s really happening with Malaysia’s largest Offshore Support Vessel (OSV) builder as it charts a new course.

1. How a 80% Profit Drop Can Actually Be Good News

A massive profit plunge hides a story of growing core strength.

Looking at the headline numbers, you’d be right to raise an eyebrow. The Group’s net profit for the first nine months of 2025 (9M2025) plummeted by 80%, falling to RM133.7 million from RM683.9 million in the same period last year. However, this comparison is highly misleading.

The 2024 figure was artificially inflated by a massive one-off “waiver of debts” amounting to RM393.4 million, which was part of a major debt restructuring. This wasn’t profit from operations; it was an accounting gain from clearing the books. If we look at the company’s recent operational performance, a much healthier picture emerges. On a quarter-over-quarter basis, Core PATMI (Profit Attributable to Owners of the Parent, a key measure that reflects core operational profitability) actually increased by a strong 26% to RM55.3 million in Q3 2025. This operational strength is also reflected in the 6% sequential revenue growth in the most recent quarter, showing that with the restructuring complete, the company’s underlying business is gaining momentum and its profitability is becoming more stable and predictable.

2. The Shipbuilder Focused on Chartering

Malaysia’s largest OSV builder is making all its money from chartering, not building.

A striking detail from the segment analysis reveals the core of Nam Cheong’s current strategy: for the first nine months of 2025, its shipbuilding segment registered zero revenue. 100% of the Group’s RM449.0 million in revenue came from its vessel chartering division.

For a company renowned for its shipbuilding capabilities, this isn’t a sign of failure but a deliberate strategic pivot. Instead of chasing newbuild orders in a cautious market, Nam Cheong is focusing on the reliable, cash-generating power of its existing fleet. This disciplined approach is a cornerstone of its current strategy. As CEO Mr. Leong Seng Keat stated:

“More importantly, the solid and recurring cash flow generated from the chartering business provides a strong foundation to support this prudent and strategic approach.”

This isn’t just about risk management; it’s about strategic sequencing. The “solid and recurring cash flow” Mr. Leong mentions is the engine that funds the push for long-term contracts and gives the company the financial strength to patiently wait for the ideal moment to re-engage its shipbuilding expertise in a supply-constrained market.

3. Locking in Stability with Long-Term Contracts

The company is building a fortress of predictable revenue.

Nam Cheong has a clear and publicly stated goal: to secure 70% of its vessel fleet on long-term charters. The purpose of this strategy is to ensure “resilience and stability” in its revenue streams.

The company is making solid progress. In the third quarter of 2025, overall vessel utilization rose to 70%, and importantly, 60% of the entire fleet is now operating under long-term contracts. This strategic shift is significant because it de-risks the business model. By moving away from the volatility of the spot market and toward a foundation of predictable, recurring revenue, Nam Cheong is creating a more stable financial profile that is highly valued by investors and provides a crucial buffer against market fluctuations.

4. Perfectly Positioned in a Market of Scarcity

Favorable market conditions are creating a powerful tailwind.

Nam Cheong isn’t just executing its strategy in a vacuum; it’s doing so in a market with powerful “structural supply constraints.” A shortage of available Offshore Support Vessels in Malaysia is creating a highly favorable environment for charter rates. This scarcity is driven by two key factors:

• An Aging Fleet: The global OSV fleet is getting older, but construction of new vessels remains low. This is primarily because banks are still cautious about extending the financing required for major newbuild programs.
• Protective Policies: Malaysia’s cabotage policies create a protective barrier by limiting competition from foreign vessels in local waters, further restricting the available supply of ships.

As a direct result of these market dynamics, OSV charter rates are expected to “remain well supported in 2026.” With the “largest and the most advanced OSV fleet on Malaysian waters,” Nam Cheong is in a prime position to benefit directly from this industry-wide supply crunch.

Conclusion: A Company Charting a New Course

The true story of Nam Cheong is one of disciplined execution. By shedding the accounting noise of its past restructuring, the company has focused entirely on its cash-generating vessel chartering business. This operational focus is methodically being de-risked by locking in a fortress of long-term contracts, creating a stable platform from which to capitalize on the powerful market tailwinds of a looming vessel shortage.

The immediate past was about financial recovery. The present is about operational stability. The future now holds a new, intriguing question: With its chartering business providing a solid foundation, how and when will Nam Cheong leverage its deep shipbuilding expertise to capitalize on the coming vessel replacement cycle?

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