• Our ground check with Dayang suggests that activities remain intact. The key takeaway is the larger-than-expected order book value of RM6.2bn (vs. our prior estimate of RM5.2bn), which could drive an upside to our earnings forecast

• The upcoming 4Q24 earnings to show stronger YoY results, driven by higher work orders, vessel utilisation rates, and improved charter rates

• The 16% pullback in share price over the past 3 months presents a strong opportunity to accumulate. Maintain BUY rating with RM4.50 target price

Riding the tide

We were pleasantly surprised by the higher actual order book value of RM6.2bn vs. our prior estimate of RM5.2bn. This could result in higher work order value and present upside risks to our earnings forecast, depending on clients’ work programmes. Dayang has been a key beneficiary of the latest Petronas’ Pan Malaysia MCM contract, accounting for 80% of the current order book. Management guided that there have been no signs of a slowdown in work orders despite concerns about possible capex cuts from Petronas. As a Sarawak-based company, we maintain that Dayang will be one of the primary beneficiaries under PETROS. The demand for offshore vessels remains healthy for the marine business, with high utilisation rates across Dayang and Perdana Petroleum vessels. Management anticipates a 4–5% increase in charter rates, driven by the ongoing vessel supply shortage, which will further strengthen margins.

RM6.2bn order book to drive 2025 earnings

We expect 4Q24 to be stronger YoY, driven by higher overall work orders, increased vessel utilisation rates, and improved daily charter rates (DCR). Vessel utilisation in 4Q24 is expected to be higher than the 58% recorded in 4Q23, primarily due to the need to complete work orders ahead of the expiration of the previous HUC/MCM contract in Dec 24. With the recent contract wins driving a record-high order book, we remain positive on the 2025 earnings outlook.

Reiterate BUY with RM4.50 target price

We find the current valuation appealing at 7x 2025E PE. We reiterate our BUY rating and 12- month target price of RM4.50, based on an unchanged 16x PE multiple on 2025E EPS. Key risks to our BUY call include unforeseen delays in work orders, a sharp decline in DCR, and higher-than-expected operating costs.

Source: Phillip Capital Research - 16 Jan 2025