Dayang recorded 1QFY24 core net profit of RM38.6m, a stark contrast from the core net loss of RM15.9m in 1QFY23. This is mainly attributed to the marine charter segment as it recorded core profit of RM13.0m versus core net loss of RM22.9m previously due to higher vessel utilisation rate and elevated daily charter rate (DCR). Meanwhile, offshore topside maintenance services (TMS) segment continues to excel with segmental profit expanding by 4.6x on a YoY basis due to higher work order received from oil majors. We deem the financial result as in-line with our and consensus estimates despite only meeting 16% of full year forecast as 1Q is typically the weakest for the year due to unfavourable weather conditions. Nevertheless, Dayang still managed to record the best 1Q result in a decade, signalling its growth trajectory is on track. We maintain our Outperform rating with higher TP of RM3.75 (from RM3.35) as we rollover our valuation, pegging the unchanged 16x (+1SD above mean) on FY25F EPS (from FY24F EPS).

• Marine charter segmental revenue tripled to RM103.9m from RM34.0min 1QFY23, hence flipping its bottom line to core profit of RM13.0m fromcore loss of RM22.9m last year. This is mainly attributed to higher vesselutilisation rate of 48% against 26% in 2023 due to higher offshore supportvessels (OSV) required for offshore production operations with El Ninolessening the monsoon effect. The DCR also sustained at elevated levelsamid the shortage of locally-flagged OSVs.

• Offshore TMS segment continues to excel with segmental profitexpanding by 4.6x YoY to RM39.9m and revenue higher by 77.3% toRM139.0m. The increase in revenue is mainly due to more work ordersreceived from oil majors. We believe the higher margin in the segment ispartly contributed to the Asset Integrity Finding (AIF) contract, which justkicked-off early this year and to run until December 2026, with morefavourable rates embedded in the estimated orderbook of RM1.2bn.

• Growth trajectory on track. Tight OSV supply will continue to underpinelevated DCR levels, potentially even continuing to creep up. To addressthe situation, PETRONAS’ long-term contracts such as Project Safina 2.0(7-10 years) and Integrated Logistic Control Tower (ILCT) (3+3 years)encourages more participation from the investment community to financenew vessel orders. Dayang, through its subsidiary Perdana Petroleum,would be forerunner to secure the contracts and expand its fleet.As for the offshore TMS segment, we expect Dayang would secure the new Maintenance, Construction, and Modification (MCM) and Hook-Up and Commissioning (HUC) contract to replace the existing contract under extension in 2H2024. Work order rate should be more sustainable at estimated value of about RM4-5bn each, for up to 10 years including extensions.

Source: PublicInvest Research - 24 May 2024