2016 a year of consolidation for Dayang

KUCHING: Dayang Enterprise Holdings Bhd (Dayang) saw its results for financial year 2015 (FY15) within expectations, with its final quarter (4Q15) core profit after tax, amortisation and minority interest (PATAMI) coming in at RM23 million.

This brings its full FY15 core PATAMI to RM105.8 million which was broadly within analysts and consensus forecast at 107 per cent and 105 per cent respectively.

Hong Leong Investment Bank Bhd (HLIB Research) observed that Dayang’s 4Q15 core PATAMI fell 26.2 per cent year on year (yo-y) mainly due to low value of work orders for Dayang’s core HUC business and higher losses recognition from Perdana arising from lower vessel utilisation.

“For FY15, Dayang’s core PATAMI weakened by 40.7 per cent y-o-y due to a full consolidation of losses from Perdana Petroleum Bhd, caused by low vessel utilisation; Higher interest cost due to debt consolidation of Perdana and slower work recognition in view of weak oil prices,” it detailled in a report yesterday.

“Despite the unfavourable short-term outlook for Perdana due to lower average utilisation, the acquisition is a strategic fit for both companies as Perdana’s fleet of vessels will be complementary to Dayang’s hook up, construction and commissioning ( HUCC) business.

“This will help Dayang to entrench its position for next round of HUC tender in 2018 and 2019.”

In a separate note, Kenanga Investment Bank Bhd (Kenanga Research) foresees Dayang’s earnings to come under pressure after consolidating Perdana Petroleum within the group in the near-term in view of the challenging local OSV market with demand likely to come off as O&G activities are slow at this juncture.

“Dayang aims to turn around Perdana by reducing its breakeven utilisation, vessel redeployment and other cost optimisation measures,” it said in the report. “It is in the midst of refinancing its US dollat denominated loan worth US$170 million, which is slated to complete by March this year.

“Timing risks are still present for its HUC projects, which account for a significant portion of the group’s revenue contribution as its oil majors clients seek to defer contracts partially to later years in lieu of uncertainty in crude oil prices.”

To note, debt restructuring for Perdana’s US dollar-denominated debt is still ongoing and the group intends to refinance the loans with ringgit-denominated loans to reduce currency risk for the group.

“The group is unlikely to take delivery of its two upcoming barges and it has already written down on the deposit paid for the first vessel, which is a prudent move for the group under the current environment to avoid further strain on balance sheet and earnings<’ continued HLIB Research.

“Its latest orderbook is about RM3.8 billion which will last at least until 2018. However, Timing of revenue recognition is uncertain as the contracts are on call-out basis.

“Dayang is tendering RM350m worth of contracts with tenderbook expected to expand given submission of several tenders in the next few months.”