Stripping off exceptional items totalling RM214.9m which comprises impairment loss on fixed assets and goodwill totalling RM204.5m and RM10.4m on trade receivables, Dayang reported a core net loss of RM73.6m in 4QFY21. This is despite of a higher revenue by 26.5% YoY. The weaker performance was mainly due to additional depreciation charge of RM45.6m given the change of the useful life for its 8 Anchor Handling Tug Supply (AHTS) from 25 years to 15 years. The Group’s full-year FY21 revenue fell 8.7% YoY to RM667.7m, while also slumping into a net loss of RM72m, as work orders were delayed in light of the strict adherence to the COVID-19 SOPs, resulting in lower efficiency and higher operating costs. Excluding the one-off adjustment on depreciation charge, full year core net loss is a narrower RM26.4m. Regardless, this is below our and consensus expectations of RM15.5m and RM5.9m net profit. While FY22 earnings are likely to be stronger due to improved industry activity, we err on the side of caution and account for lower operational efficiencies, trimming FY22/23 earnings by 31.5% on average. Our Outperform call is retained nonetheless with a revised TP of RM1.15 (from RM1.35 previously) as we rollover our valuation to FY23.

• Weak quarter. Dayang reported core net loss of RM73.6m in 4QFY21 on the back of RM200.2m (-10.6% QoQ) revenue. Lower top line number doesn’t come as a surprise as we had already expected weaker numbers QoQ given the typically lower vessel utilisation because of seasonal monsoon weather. Vessel utilisation for the quarter fell to 38% as compared to 66% in 3QFY21. Performance was further exacerbated by additional depreciation charge of RM45.6m given the change of the useful life for its 8 AHTS from 25 years to 15 years. Excluding this, 4QFY21 core net loss is a narrower RM28m, with gross profit margin at 20.6% as compared to 27% in 3QFY21 and 25.9% in 4QFY20.

• Cautiously optimistic. We foresee improving earnings in FY22 on the back of higher workforce capacity as well as the absence of the required 14-days quarantine given the relaxation of SOPs. Sector activities are also expected to improve as capital spending by the oil majors accelerate on the back of higher oil price of around USD90/bbl. As of December 2021, its orderbook stands at RM1.9bn.

Source: PublicInvest Research - 23 Feb 2022