Dayang to gain from recovery in oil and gas activity

PETALING JAYA: Kenanga Research is “neutral” on Dayang Enterprise Holdings Bhd’s latest landing craft tank (LCT) contract win from Sarawak Shell Bhd (SSB) and Sabah Shell Petroleum Company Ltd (SSPC) given its potentially “smallish” value.

Dayang announced that it had been awarded the LCT contract tentatively from Sept 26, with the duration of 548 days, plus an extension option for six months.

No values were disclosed, as the value of the contract will be based on work orders issued.

Kenanga Research said in its latest report: “Based on the job scope, we estimate the value of the contract to be roughly Rm4mil in total.

“This

is somewhat inconsequential to the group’s current total offshore maintenance of Rm1.8bil,” it added.

Likewise, assuming 20% net margin from the job, the research house said its back-of-envelope calculations suggest earnings impact of RM500,000 per year or less than 1% of its forecasted financial year 2022 (FY22) and FY23.

“Overall, we are largely ‘neutral’ on the announcement given the smallish contract value having minimal impact to the group’s earnings and outlook,” added Kenanga Research.

Meanwhile, Dayang’s 63.7% subsidiary Perdana Petroleum Bhd’s second quarter (2Q) FY22 results saw improvement in numbers.

“The quarter managed to see reported net loss, which shrunk by 83% year-on-year and 47% quarter-on-quarter to Rm14mil, on the back of improved vessel utilisation of 60%.

“As such, this gives us some comfort reiterating our view that Dayang’s upcoming 2Q22 quarterly results should similarly see better quarterly numbers ahead on the back of improved demand for offshore works,” it added.

Kenanga Research maintained an “outperform” call on the stock with a target price of RM1.25.

“Overall, we like Dayang for its promising earnings recovery visible in the coming quarters, with it being a good play on the overall recovery of local oil and gas activity levels,” said the research house.