Dayang Enterprise (Dayang) recorded a core net profit of RM75.6m in 3QFY23, higher by +42.4% YoY but lower by 9.9% QoQ. Dayang recorded RM343.8m revenue for the quarter, lifted by marine charter revenue at a record-high of RM164.1m, increasing by 49.2% YoY due to higher daily charter rate (DCR) as it recorded similar utilisation rate of 80%. Cumulatively, Dayang’s core net profit of RM143.6m for 9MFY23 is deemed to have met our estimates at 82% but ahead of consensus at 89.6% of full-year FY23 numbers as we believe 4Q is seasonally weaker than 3Q. Performance recorded by the Marine Charter segment validates our assessment on elevated DCRs amid the tight offshore support vessel (OSV) market, which could last for the next 2-3 years. We also remain optimistic on its Topside Maintenance Services (TMS) segment come FY24F, on long-outstanding upward revisions of new tenders and maintenance backlog programs. We maintain our Outperform rating and TP of RM2.25, pegged at 12x FY24 EPS. Dayang declared an interim dividend of 1.5sen per share, unchanged from FY22.

• Strong growth in Marine Charter segment. Marine charter revenue at a record-high of RM164.1m in 3QFY23 increased by 49.2% YoY and 30.3% QoQ. This is due to higher DCR at similar utilisation rate of 80% in both 3QFY23 and 3QFY22. This validates our assessment on elevated DCRs amid a tight OSV market, and changes in contracting strategies by clients. Based on our checks, we understand that all local OSVs are being fully chartered with some local players hiring foreign flagged vessels to fillin the demand gaps with cost-plus margins. We reckon that the tight OSV market could last for the next 2-3 years and keep DCRs at elevated levels until new vessel supply gradually fills the market.

• Optimistic on TMS segment. Dayang recorded TMS segmental revenue of RM190.7m in 3QFY23, lower by 25.8% YoY. Although the performance is subdued for the quarter due to lower call orders, we remain optimistic over FY24F on potential upward revision of unit rates on new tenders. The quantum of rate revision is about 20%-25%, which is reasonable in our view, after considering inflationary factors given the current rate was set back in 2018. Dayang could also be frontrunner to secure at least two maintenance backlog contracts with estimated value c.RM1.5bn. This is substantiated by Dayang reportedly undergoing job scoping for the program currently.

Source: PublicInvest Research - 24 Nov 2023