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PublicInvest Research

Author: PublicInvest   |   Latest post: Wed, 19 Jun 2019, 11:29 AM

 

Daya Materials Berhad - Darkest Before Dawn

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The Group reported a 2QFY18 net loss of RM16.0m, plunging it deeper into a financial quagmire with its shareholders’ equity now at –RM2.7m. While we take encouragement at the fact that it remains profitable operationally, ghosts of its past continues to haunt. Non-operational losses in the form of an RM5.1m impairment charge on a crawler crane, an RM3.2m reinstatement of debts previously waived and an RM7.4m allowance for doubtful debts on receivables has put paid to whatever nascent recovery 1QFY18 numbers were starting to show. Near-term sentiment will continue to be clouded by its PN17 status, with its regularization plan keenly anticipated, likely sometime October/November. We remain cautiously optimistic over Daya’s restructuring and turnaround efforts, with the securing of various contracts in recent months reflective of its operational abilities, and the vested financial interests of various stakeholders (management and Board) likely to see to the success of any ensuing regularization plans. Pending further clarity however, we continue to place our target price under review but with Neutral call maintained. Share price may react negatively to this latest development.

  • The Oil and Gas segment reported profit before interest and tax (PBIT) of only RM2.4m in 1HFY18, down 84.7% YoY, with the above-mentioned impairment charge and debt reinstatement a blight whilst the previous financial period included debt waivers amounting to RM9.9m.
  • The Technical Services (TS) segment recorded a PBIT of RM7.9m (+29.6% YoY) in 1HFY18, largely due to the commencement of new projects.
  • Other updates. We had previously highlighted that Yuk Tung Construction Sdn Bhd continues to hold an RM9.1m claim against 51%-owned Daya CMT for further rectification costs in relation to a previous case. There is no progress on this but while management is confident of defending against this claim and has made no provision for losses in its financial statements, the Group can ill afford this further loss at this juncture. On a brighter note, the Group announced in June the entering into of an agreement with Russian-based Schlumberger Logelco.for the provision of non-explosive radial cutting torch (RCT), perforating torch cutter (PTC Puncher) and related energetic and thermite-based solutions services, though no values were disclosed. Cumulative orderbook stands at ~RM530m.

Source: PublicInvest Research - 30 Aug 2018

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