Dayang managed to book a core net profit of RM15.1m 4QFY22 from a net loss of RM28.0m in 4QFY21, underpinned by topline growth of +11.1% YoY. This was contributed by offshore topside maintenance services (TMS) with more work orders and contracts being awarded and completed prior to the monsoon season during the period. The Group also saw better vessel utilisation rate of 54% as compared to 38% in 4Q2021. On a QoQ basis, core net profit came in weaker by 76.4% however, in tandem with lower revenue by 34.3% due to slower offshore O&G activities during the monsoon season. Overall, the FY22 core net profit of RM133.5m exceeded both our and consensus expectations of RM115.3m and RM120.4m respectively. We revise our FY23-24 earnings forecasts higher by 9.7% and 27.9%% respectively and introduce FY25 earnings forecast, as we see more contracts with better rates to be awarded in the future on the back of stable oil price at the current USD80-90/bbl level amid steadier outlook for offshore Maintenance Construction and Modification (MCM) works. We also believe the Group may benefit from a tight vessel market to negotiate higher daily charter rate (DCR) for its vessel. Maintain Outperform with a revised TP of RM1.74 (from RM1.58) based on 14x PER multiple over FY23 EPS. The Group declared a single tier interim dividend of 1.5sen per share.

• Profitable in monsoon season. Dayang recorded core net profit of RM15.1m in 4QFY22 from a net loss of RM28.0m in 4QFY21. This is in tandem with higher topline growth of +11.1% YoY, attributed to higher contribution from the offshore TMS segment by 19.0% YoY. This is due to more work orders and contracts being awarded, and the Group managing to complete the order prior to the start of the monsoon season. Nevertheless, the Group recorded weaker core net profit by 76.4% on a QoQ basis as it slowed down its offshore TMS-based works once the monsoon season kicked in.

• FY23-FY25 outlook. We believe the current oil price level of USD80- 90/bbl favours the Group’s offshore TMS and marine charter services. Based on Petronas’ Activity Outlook (PAO), the requirement for offshore MCM activities in 2023 will be higher by 37% to 11.9m man-hours and will trend higher until FY25 from just 8.7m man-hours in FY22. We reckon more contracts with better rates will be awarded in the future. This is in addition to current orderbook which stands at about RM1.4bn. Furthermore, the tight vessel market may translate into better DCR, with the situation possibly remaining for the next 2 years given lead time for order of new vessels.

Source: PublicInvest Research - 17 Feb 2023