The Sarawak-based group is well positioned to benefit from an uptick in maintenance services and higher capital expenditure by national oil corporation Petroliam Nasional Bhd (Petronas).
DEHB is principally involved in the provision of maintenance services for topside structures, pipes and valves, electrical and instrumentation, fabrication operations, and hook-up and commissioning (HUC).
The positive outlook appears to be a ray of sunshine as the O&G sector as a whole has received downgrades from research houses.
In a note on March 14, Kenanga Research downgraded the sector to “neutral” from “overweight” on limited upside catalysts for “big-cap Petronas names”. However, it cited an exception.
“We have highlighted Dayang to be one of the key beneficiaries, given the planned increase in offshore maintenance, construction and modification (MCM), and hook-up and commissioning works,” it said.
Positive developments
The positive sentiment is shared by RHB Investment Bank Bhd Research and Hong Leong Investment Bank (HLIB).
“Despite anticipation of a seasonally weaker Q1 2023, we remain upbeat on Dayang Enterprise’s outlook for 2023, premised on the back of robust work orders and better revision rates,” said RHB Research.
As of Q4 FY2022, DEHB’s outstanding call-out contracts are estimated at RM1.4 billion, with mobilisation work expected to kick-start in March.
In a recent note, HLIB said the awarding of three contracts for the provision of accommodation work boats – namely Dayang Zamrud, Dayang Opal and Dayang Ruby – from Petronas Carigali were “positive developments” for the company.
The duration for the said contracts is approximately 214 days effective from Feb 3, 2023 with an option to extend for another 60 days.
“(Steady and strong performance is expected due to) improved job contract values across the board for most (of the) service provider value chain by more than 15% for MCM and i-HUC works,” said HLIB.
DEHB also has a 63.8% equity stake in Perdana Petroleum (Perdana), which owns 16 vessels that provide marine support and vessel chartering for the O&G industry.
Golden year for O&G service providers?
Both HLIB and RHB Research forecast improved projected blended vessel utilisation rates, with the latter estimating 65% utilisation rates (over 60% for FY2022).
“We believe that 2023 will be a golden year for the oil and gas service providers – a laggard theme to the elevated oil price environment for the past year,” said HLIB.
It maintained its “buy” call with a target price (TP) of RM1.87, based on 14 times FY2024 forecasted profits.
Similarly, RHB Research maintained a “buy” call, revising the TP upwards to RM1.73 from RM1.58. Kenanga Research maintains a “buy” call on the stock, with a TP of RM1.90.
Dayang returned to the black with a net profit of RM15.6 million in Q4 FY2022 ended Dec 31, 2022 from a loss of RM288.5 million a year ago due to the reversal of impairment loss and net unrealised and realised foreign exchange gain.
For FY2022, its net profit improved to RM124.4 million compared to a loss of RM316.6 million as the group made the reversal of impairment loss of RM7.3 million, as well as an insurance claim of RM11 million received from the Dayang Topaz incident in 2020.
It announced its single-tier second interim dividend of 1.5 sen per share to be paid on March 17.
DEHB’s share price rose 6 sen or 4.62% to RM1.36 yesterday, giving the group a market capitalisation of RM1.57 billion.