Dayang overall margins could improve in 2022 to 2024

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Dayang’s overall margins could improve in 2022 to 2024 on the back of a better operating environment and the relaxation of quarantine requirements and SOPs, analysts observed.

 

KUCHING: Dayang Enterprise Holdings Bhd’s (Dayang) overall margins could improve in 2022 to 2024 on the back of a better operating environment and the relaxation of quarantine requirements and standard operating procedure (SOPs), analysts observed.

In a report, the research arm at RHB Investment Bank Bhd (RHB Investment) said: “Overall margins could improve in 2022 to 2024 on the back of a better operating environment (potential rate revision and higher vessel utilisation) and the relaxation of quarantine requirements and SOPs.

It noted that Dayang’s GPM (ex-impairments) was at 12 per cent in 2021, and could return to FY20’s 32 per cent this year.

“We believe it will take time for its margin to resume to pre-pandemic levels of 40 to 47 per cent (2018 to 2019), especially when the company is facing growing pressure in logistics and equipment costs,” it opined.

Aside from that, Perdana Petroleum (Perdana) is expected to break even next year.

RHB Investment noted that 63.7 per cent-owned Perdana’s vessel utilisation rate was at 47 per cent in 1H22.

As such, it expected this to improve in 2H22 and 2023.

“The full-year utilisation rate is targeted at high more than 50 per cent (FY21: 49 per cent) levels. Most vessels are on spot charters, and daily charter rates are improving.

“Management expects overall OSV demand to pick up, driven by stronger demand for drilling, plug & abandonment (P&A), and underwater services.

“Over half of Perdana’s vessels will be chartered internally to Dayang to execute its in-house projects.

“We think Perdana will see minimal losses in FY22 (FY21 core loss: RM79 million) and deliver a small profit in FY23,” it added.

The Project Safina could also drive fleet rejuvenation.

“With an average fleet age of 12 years, Dayang is looking to kick-start its fleet renewal programme this year. It participated in Petronas’ Safina project, involving 16 OSV new-build charter contracts.

“We believe it stands a good chance of winning the project, and is capable of growing its fleet by least two to four vessels, as its net gearing was at 0.08-folds as of 4Q21,” RHB Investment.

As of end-2Q22, Dayang’s orderbook stood at RM1.7 billion, of which Petronas’ MCM and integrated HUC (i-HUC) contracts contributed circa 76 per cent.

“With higher spending from Petronas and other clients, we expect i-HUC and MCM work orders to ramp up.

“These contracts are due for renewal in FY23, and we see a potential replenishment of circa RM3.5 billion, aside from current tenders worth RM500 million.

“Management guided that manpower working permits have been largely resolved, with most workers under six-month permits,” it said.

Overall, RHB Investment initiated its coverage on Dayang with a ‘buy’ recommendation.