Dayang’s quarterly financial performance on the mend
KUCHING: Dayang Enterprise Holdings Bhd (Dayang) is poised to register better financial performance in the coming quarters.
Analysts believed the oil and gas (O&G) company is expected to post improved financial results on increased work activities and higher vessel utilisation rate.
The research arm of Hong Leong Investment Bank Bhd (HLIB Research) expects Dayang to report stronger numbers in the coming quarters as the research firm anticipates stronger activities for the company’s hook-up and commissioning (HUC) project post recovery of crude oil prices from multi-year low earlier this year.
“On a quarter-on-quarter (q-o-q) basis, the group’s earnings in the second quarter of 2016 (2Q16) has reversed to a core net profit of RM8 million from a loss of RM26.4 million in the preceding quarter,” it said in the report.
It pegged this to significant higher HUC work orders performed and higher marine vessel utilisation on the back of recovery of crude oil prices from multi-year low in 1Q16. Therefore, HLIB Research raised its earnings forecast for Dayang’s financial year 2016 (FY16) and FY17 financials to profit of RM0.5 million and RM41.1 million respectively in anticipation of recovery in HUC activities and marine vessel utilisation.
Concurring with HLIB Research, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) said the Dayang’s improved performance in 2Q16 as compared to 1Q16 was due to stronger HUC work performed post monsoon season and better offshore support vessel (OSV) fleet utilisation.
“Te company’s offshore topside maintenance segment ( TMS) recorded stellar performance in 2Q16, an improvement of 5.3 per cent year-on-year and 98.3 per cent q-o-q, suggesting that the activities level had resumed substantially.”
Meanwhile, AllianceDBS Research Sdn Bhd ( AllianceDBS Research) in a separate note said the company’s management was optimistic that the situation will improve for the remaining two quarters as the fleet utilisation rate is looking to improve in the near future.
In the meantime, the research division of MIDF Amanah Investment Bank Bhd (MIDF Research) believes that the strengthening and stabilising crude oil price will allow increase work orders to Dayang in the coming quarters into FY17 although it noted that the O&G company’s financial performance was affected by loss-making Perdana Petroleum Bhd.
The research firm opined that the current rationalisation effort for Perdana Petroleum by Dayang might cause a turnaround in the entire group’s performance.
It estimated Dayang’s full year 2016 earnings might swing into profit.
MIDF Research observed that although Dayang reported a loss of RM28.3 million for six months ended June 2016, it noted that the company’s quarterly losses were narrowing and the normalised cumulative loss was just RM1.4 million.
Thus, it opined that there is a likelihood of the company’s earnings swinging back into the black by year-end. Dayang has a total orderbook of RM3.2 billion with a burn-rate until 2018. The research firm also observed the O&G company’s tender book stood at approximately RM4 billion.
Therefore, analysts believe Dayang’s financial performance might improve on increased work activities and vessel utilisation in the coming quarters.