- Keep BUY and MYR1.73 TP (14x FY23F P/E), 36% upside and c.2% yield. We are positive on the contract win for the provision of its accommodation work boat (AWB) as it provides better certainty over vessel utilisation in FY23F. Daily charter rates (DCRs) are also guided to be better. Despite anticipation of a seasonally weaker 1Q23, we remain upbeat on Dayang Enterprise’s outlook for 2023, premised on the back of robust work orders and better revision rates.
- Fourth AWB contract win announced YTD. DEHB announced a contract win for the provision of its AWB, Dayang Berlian from Petronas Carigali. The contract duration is c.207 days from 17 Feb 2023 with an option to extend up to 90 days.
- Solid DCRs. This is the fourth contract win announced subsequent to the three contract wins for three other AWBs – Dayang Ruby, Opal and Zamrud end of last month. We understand that the DCRs are now above MYR70,000-MYR90,000/day depending on the specification and vessel conditions. This represents a decent improvement from the MYR50,000- 70,000/day range a year ago.
- Perdana Petroleum’s vessel utilisation to ramp up in 2Q23. Meanwhile, DEHB’s subsidiary Perdana Petroleum (PETR MK, NR) is likely to register stronger YoY but lower QoQ vessel utilisation in 1Q23 (1Q22’s 33%; 4Q22’s 60%). Overall full year vessel utilisation could potentially improve to 65% (from 59% in 2022) as quarterly utilisation is likely to accelerate to >80% in 2Q-3Q23 backed by higher upstream activities. Most vessels are either on spot charters and short term contracts, and we also understand that about six vessels will be chartered to DEHB for its in-house jobs.
- We maintain our earnings estimates as we have imputed vessel utilisation of 65-66% in FY23F-24F. Our TP remains unchanged at MYR1.73 based on 14x FY23F P/E, or +1SD from its 5-year mean. There is also a 2% ESG discount applied as per our in-house proprietary methodology. DEHB’s outstanding call-out contracts are estimated at MYR1.4bn as at 4Q22. We expect quarterly earnings to remain subdued in 1Q23 as the bulk of the mobilisation work will kick-start in March. That said, we expect its maintenance, construction & modification work orders to ramp up this year, in accordance with Petronas’ guidance.
- Downside risks: A decline in new work orders, softer oil prices (which could limit clients’ spending), and higher operating costs.
Source: RHB Research - 22 Mar 2023
