Analyst anticipates record profits for Dayang in FY24

KUCHING (July 16): Analysts are now anticipating Dayang Enterprise Holdings Bhd (Dayang) to register record profits in its financial year 2024 (FY24) due to expectations of higher call-outs for its hook-up & commissioning (HUC) and topside maintenance, better margins, and higher daily charter rates (DCR) for its marine division.

In a company update, Kenanga Investment Bank Bhd’s research arm (Kenanga Research) guided that they had recently came away from an analyst briefing with Dayang feeling upbeat about its prospects as its management had guided that its order book remains healthy with RM1.7 billion in call-out contracts to be utilised in FY24.

“Gross margins for these contracts are also expected to approach peak margins seen in 2019 at 50 per cent as the oil & gas (O&G) upstream maintenance sector enters into an upcycle in FY24,” it said.

According to Dayang, these call-out contracts have been on more favourable revised terms since 2022.

Looking ahead, the research arm also noted that the O&G services provider had guided that they would be bidding for a major HUC and topside maintenance job from Petroliam Nasional Bhd (Petronas), with the earliest bid expected by the end of 2024.

While it is still unclear if Petronas will opt for a 10-year umbrella contract or one-year extensions for this particular job, Kenanga Research reckons that regardless, Dayang is poised to benefit from the ramp-up in HUC and topside maintenance jobs in FY24 and FY25 due to their strong project execution track record.

Meanwhile for Dayang’s marine division, its 63.49 per cent owned Perdana Petroleum Bhd (Perdana) which has a fleet of eight anchor handling tug supply vessel (AHTS), six accommodation work barges, and three accommodation workboats is also expected to record significant earnings growth amidst the ongoing boom in the local offshore support vessel (OSV) market.

“Perdana’s AHTS vessels, with a bollard pull capacity of up to 12,240 bhp, fetch a DCR of RM60,000, while its accommodation workboats can fetch up to RM100,000,” guided the research arm.

After factoring in these higher HUC and topside maintenance call outs, margins and DCRs, Kenanga Research who maintains an ‘outperform’ call on Dayang has opted to raise their FY24 net profit forecast for Dayang by 66 per cent to RM240.9 million.

“For FY24-25F, we assume average DCRs of RM89,200 to RM101,400 for its workboat/barge vessels and RM56,250 to RM66,500 for its AHTS vessels,” they added.

Consequently, they also upgrade Dayang’s target price by 74 per cent from RM1.90 to RM3.31 which is pegged to a 13-times FY25 price earnings ratio (PER) which is a 1-times multiple premium to the average forward 12-times PER of its closest peers during the up-cycle in 2014.

“This is to reflect Dayang’s market leader position in the topside maintenance space and its significantly larger market capitalisation,” the research arm reasoned.