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Nam Cheong looks forward to better times ahead after completing restructuring

Battered offshore supply vessel (OSV) shipbuilder Nam Cheong is looking forward to emerging from its long period of financial troubles with the successful approval and sanction of its scheme of arrangement as well as a proposed rights issue that will help to ease its cash crunch as well as position well for a recovery and future growth in oil and gas business.

In a letter to shareholders, executive chairman Tiong Su Kouk expressed thanks for the support during “the most challenging period in our corporate history” and added that “the worst is now behind us” as a key obstacle in the group’s restructuring exercise has been overcome, enabling it to strengthen its financial position and operate as a going concern.

In summary, the various measures will see the group’s net tangible assets position improve by at least MYR1.1bn ($265m) as a rights issue is also set to add some MYR88m in cash which will be used for working capital and repayment of debts.

Read More: Nam Cheong urges noteholders to vote for debt restructuring

Looking ahead, Nam Cheong expects to see better times ahead and aims to tap the nascent recovery in the offshore and marine (O&M) industry.

“We expect the O&M sector to gradually recover from the current downturn over the next few years, where the vessel selling prices and charter rates are expected to recover,” Tiong said in the letter.

Nam Cheong also pointed out it had reacted quickly and flexibly to the market downturn, diversifying into the vessel chartering business, which it now hopes to grow as the market picks up. “In response to this gradual recovery and the ongoing challenging market conditions for shipbuilding, we have, since 2017, expanded our vessel chartering segment by optimising our idle assets through vessel chartering and setting up our own full-fledged chartering operation,” he said, noting that active participation in the tenders had reaped rewards as seen in the 35% increase in charter revenue in the first half of 2018.

“Our position as a serious player in Malaysia’s vessel chartering market has been further solidified,” Tiong said.

“With these strategies in place, we believe that we will emerge from this protracted industry cycle stronger, as we look ahead towards longer-term prospects for this segment,” he concluded.

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