Analysts optimistic of stronger 2QFY18 for Dayang


KUCHING: Dayang Enterprise Holdings Bhd’s (Dayang) first quarter of the financial year 2018 (1QFY18) results are viewed as encouraging and analysts remain optimistic that the company could record a stronger 2QFY18.

According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), excluding unrealised forex losses, Dayang posted an “encouraging” normalised earnings of RM8.1 million.

It said, “The commendable earnings is premised on upbeat revenue of RM148.8 million, representing an increase of 26.2 per cent year-on-year (y-o-y).

“The surge in sales is largely attributable to higher work orders received and performed under the topside maintenance services.

“We are pleasantly surprised by the commendable normalised earnings as we expected 1QFY18 results to be negatively affected by Perdana Petroleum Bhd (Perdana Petroleum).

“Nonetheless, we remain optimistic and maintain our expectations of stronger 2QFY18 and 3QFY18. Our expectation is based on strong activity levels until October 2018.”

Meanwhile, on its subsidiary, the research team noted that Dayang’s profitability from the engineering segments (RM43.3 million profit before tax) has been hampered by Perdana Petroleum Berhad (RM68 million loss before tax) as the latter’s fleet utilisation rate is low at 27 per cent.

In addition, the reported earnings is impacted by unrealised forex losses from its borrowings, the research team added.

As for the company’s orderbook, MIDF Research said the company’s current orderbook stands at approximately RM2 billion lasting through to 2022.

It also noted that the company has participated in approximately RM8 billion worth of projects, in particular the Pan MCM tenders.

“The company remains fairly confident of winning a portion given its track record and successful campaigns in similar projects,” the research team added.

According to Dayang, activity levels for the Maintenance, Construction and Modifications Contract (MCM) and Topside Maintenance Services works under the Pan Hook-up and Commissioning Contract (Pan HUC) improved in 1QFY18 despite the typical cyclical monsoon months.

“Dayang is no stranger to Petronas’ maintenance, construction and modification (MCM) works as it was the incumbent for the previous HUC contracts from 2013,” the research team said.

It noted that currently, Dayang has six work vessels and two supply boats with an average age of approximately 6.5 years old.

“All of which are fit for purpose, within the stringent specifications required by Petronas and its production sharing contractors,” MIDF Research said.

All in, the research team believed that Dayang could see an earnings upcycle to start in 2QFY18, driven by offshore activities.

MIDF Research reiterated its ‘buy’ call on the stock and suggested that the recent share price retreat presents buying opportunity. MIDF Research pegged RM1.06 per share, premised on PER18 of 14-folds pegged to EPS18 of 7.6sen while its price earnings ratio is based on the company’s two-year historical average PER.

“We believe that company fundamentals remain intact, clear direction of management to reduce gearing and to rejuvenate Perdana Petroleum, and high orderbook quality obtained through track record and company merits,” it added.