Dayang’s earnings to stage a massive leap in 2018

KUCHING: An exciting year ahead is predicted for local player Dayang Enterprise Holdings Bhd ( Dayang) following high activity levels in its third quarter of the financial year 2017 (3QFY17).

MIDF Amanah Investment Bank Bhd ( MIDF Research) in a note saw that the group reported commendable 3QFY17 normalised earnings of RM9.5 million last month.

Although 4QFY17 is typically seasonally slower due to the seasonal monsoon season, the firm understd that offshore activity levels are remaining at elevated levels compared with that of yesteryears.

“This is largely owing to the aggressive work callouts by Petronas and its production sharing contracts (PSCs),” it added.

“Currently, the company’s utilisation rate of its 25 – of which 17 are from its subsidiary Perdana Petroleum Bhd – offshore support vessels are improving. Utilisation rates for 3QFY17 was above 75 per cent – higher than regional average – compared to only 44 per cent in 2QFY17.”

Dayang’s average fleet utilisation rates for FY17 now stands at 53 per cent, it estimated.

As for Perdana Petroleum by itself, MIDF Research said the company’s current fleet rates average at approximately 55 per cent.

“Moving into 2018, Perdana’s utilisation rate is expected to increase to between 70 to 80 per cent,” it said, adding that this was guided by by Petronas’ Activity Outlook Report 20172019.

Dayang’s current orderbook stands at a robust RM3.415 billion, with long term contracts ranging from two to five years. The company is also in the midst of increasing its orderbook, currently participating in RM8 billion worth of tenders.

Dayang is no stranger to Petronas’ maintenance, construction and modification ( MCM) works as it was the incumbent for the previous HUC contracts from 2013. Currently, Dayang on its own 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.

All this led MIDF Research to predict Dayang’s earnings to stage massive leap.

“Taking into consideration work orders for Dayang’s MCM portion; Petronas’ activity outlook for 2017- 2019; strong utilisation rate for both Dayang and Perdana’s vessels and Perdana Petroleum’s potential turnaround in 2018, we believe that FY18 will record strong revenue, possibly matching that of FY14 along with strong year-over-year profit,” it said.

“We were previously expecting the earnings upcycle to only start in the latter part of FY18. However, from the offshore activity levels that are currently taking place, we believe that the earnings upcycle for Dayang could start as early as 2QFY18.

“Based on the abovementioned earnings boosters, we are increasing our earnings forecasts for FY18 by 22.1 per cent to RM73.4 million. We are reiterating our BUY recommendation on Dayang with an upgraded target price of RM0.95 per share.”

This is largely owing to the aggressive work callouts by Petronas and its production sharing contracts (PSCs). MIDF Research