PIVB: Neutral on Dayang but expects better 2HFY20 results

Public Investment Bank (PIVB) is neutral on Dayang Enterprise Holdings Bhd, maintaining its target price of RM1.25 based on 12x PER over FY21 EPS of 10.4 sen. The counter closed at RM1.17 on Aug 21.

The research house expected a better second half (vis-à-vis 1HFY20) performance from Dayang following the government’s easing of lockdown measures.

Dayang reported core net loss of RM1.3 mil in 2QFY20 as compared to a core net profit of RM53.7 mil in 2QFY19. Cumulatively, the group’s 1HFY20 core net profit slipped by 74.4% YoY to RM12.4 mil with topline sliding by 15% YoY to RM343 mil.

“Earnings are below our and consensus estimates, accounting for only 23.7% and 9.7% of full-year expectations respectively. The performance was dragged by lower vessel utilization of 53% as compared to 61% in 1HFY19 and lower work orders received and performed from its topside maintenance due to movement control lockdowns.

“This led to significant disruptions in its operations, with gross profit margin also reduced by 5.4 ppt YTD to 29.4%. Despite the weak numbers, we are leaving our forecast unchanged as the situation has now improved, hence better numbers in 2HFY20 expected,” PIVB said.

Meanwhile, vessel utilisation rate was lower at 52% versus 55% in 1QFY20. Gross profit margin declined by 10.7 ppt to 24% in 1QFY20, which was also due to cost incurred in relation to the stricter operating procedures to combat the pandemic.

Dayang saw lower recognition (- 15.8%) in topside maintenance services during the quarter but mitigated by better performance in marine chartering segment, which was up by 10%.

Solid orderbook

The recent contract award by Sarawak Shell Bhd and Sabah Shell Petroleum Co Ltd for the provision of topside major maintenance services marked Dayang’s third award for this year, maintaining its orderbook at RM3.8 bil.

“While outstanding orderbook appears strong, timing of the work orders to be issued by oil majors which are largely based on call-outs remain a question given the current operating climate.

“Recall, global oil majors including Petronas have announced capex cuts ranging from 20% – 30% this year with upstream investment expected to plunge by 32% to US$335 bil,” PIVB added.

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