Daya’s 1QFY14 performance is back in the black, steering the Group back on track, as both SD1 and SD2 charters to Technip are already on course, contributing to higher revenue for this quarter. Revenue registered RM129.3m (+29.1% YoY, -7.6% QoQ), with earnings of RM0.9m (-81% YoY, +>100% QoQ). We are maintaining our Outperform call on Daya with a rolled-over unchanged TP of RM0.43, which implies a 10.5x multiple to its FY15F EPS of 4.1 sen. The PE multiple is lower than the previous 14x used given the uncertainties surrounding its planned capital raising exercise for the acquisition of vessels and its potential effects on balance sheet and earnings. With owned vessels however, we should expect some enhancement to Daya’s earnings.

QoQ changes. The decrease in revenue QoQ was mainly due to the lower sales recognition of cable laying project which was completed in 2013. The improvement in profitability this quarter however is from the completion of the project which suffered losses last quarter.

Polymer (Revenue: 4% contribution). Remains subdued from the slow growth prospects of the division, suppressed further by continued foreign competition. The Group however had implemented ongoing operational initiatives to deliver better production efficiency and improved cost structure, reflected in the positive results.

O&G (Revenue: 41% contribution). Will continue to be the main driver for Daya with long-term charter of SD1 and SD2 which will bring steady recurring income for the Group. Both the new-built offshore subsea construction vessels have been deployed in the North Sea since early March this year. The division is further supported by its downstream activities, in downstream chemicals and specialised lifting services.

Technical Services (Revenue: 55% contribution). Expected to grow over the next few years by leveraging on its engineering expertise, as the Group builds and execute its order book which currently exceeds RM1bn. Daya has also begun exploring strategic corporate initiatives to unlock the values.

Maintain Outperform. Daya will be buoyed by i) the LT charter of Siem Daya 1 (SD1) and Siem Daya 2 (SD2) to Technip, ii) prospects of exploration and production business via its investment into Reach Energy (soon to be listed SPAC), iii) downstream chemicals and specialised lifting services, and iv) outstanding orderbook of RM1.7bn.

Source: PublicInvest Research - 29 May 2014