Nam Cheong has seen the most challenging period in its corporate history since its incorporation in 1968 in the last two years, brought on by the sharp downturn in the oil and gas industry, which adversely impacted its financial position.
SINGAPORE: Singapore-based Nam Cheong’s position as a serious player in Malaysia’s vessel chartering market has been further solidified, says executive chairman Tan Sri Tiong Su Kouk.
He based his comment on the 35 per cent increase in its chartering revenue recorded in the first half of 2018, compared with the corresponding first half of 2017, he said in a letter to shareholders today.
A copy of the letter was made available to Bernama.
“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.
“We are pleased that our active participation in the tendering of charter contracts has made good headway and yielded results,” said Tiong.
He also said with these strategies in place, Nam Cheong, an offshore marine player, “will emerge from this protracted industry cycle stronger, as we look ahead towards longer-term prospects for this segment.”
In the letter, Tiong noted that Nam Cheong has seen the most challenging period in its corporate history since its incorporation in 1968 in the last two years, brought on by the sharp downturn in the oil and gas industry, which adversely impacted its financial position.
To mitigate the negative effect of this major market downturn, both management and the board actively reviewed and assessed the core competencies of the group, its financial capability and strategy to create – a broader business platform, focusing on long-term sustainable value for all shareholders.
Collectively, Tiong said the group had managed to obtain waiver of a substantial portion of liabilities previously owed to trade creditors amounting to RM557.5 million.
In addition, upon the successful implementation of the schemes, its liabilities were expected to further reduce by over RM500 million.
Its proposed rights issue, if fully subscribed, was also expected to increase the company’s shareholders’ fund by up to RM88 million.
All these initiatives are expected to improve the group’s net tangible asset by at least RM1.1 billion, upon the successful implementation.
As a demonstration of his commitment as a major shareholder of Nam Cheong, Tiong made an irrevocable undertaking with the deposit of a committed sum of RM50 million for the rights issue.
Net proceeds from the entire proposed fund-raising exercise would be used mainly for working capital and partially for cash payment to creditors, who had elected to receive the cash payment for a portion of their unsecured debt, as well as, for the operations of the group.
Nam Cheong was also tapping the nascent recovery in the offshore and marine (O&M) industry.
Backed by the growing confidence in the health of the oil market, crude prices have been trending above US$60 per barrel since the last quarter of 2017.
Citing Rigzone, Tiong said with stronger oil prices, capital expenditure among the world’s largest oil and gas companies was expected to increase 11.5 per cent, year-on-year in 2018, largely driven by national oil companies, particularly in Southeast Asia.
Supported by strong growth in developed and emerging economies in the first quarter of 2018, global oil demand is expected to increase from last year by 1.65 million barrels a day to 98.85 million barrels a day.
“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,” added Tiong. — Bernama