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Author: PublicInvest   |   Latest post: Tue, 25 Jun 2019, 11:52 AM

 

Daya Materials Berhad - Kitchen-Sinking.. And More

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Just when we thought things couldn’t get any worse, it has with an RM24.1m net loss reported for the quarter due to another round of allowances and impairments on legacy issues totalling some RM30.6m. Reported 9MFY18 net loss of RM40.9m is an even larger amount than the previous corresponding period’s RM34.1m loss (which included a one-off disposal loss adjustment of RM30.5m due to errors in classification). The one encouragement remains that the company is profitable operationally, which is reflective of the Group’s continued abilities to secure and execute on orders. Near-term sentiment will continue to be clouded by its PN17 status, with its regularization plan keenly anticipated. The Group still has 3 months to submit its plans. We are cautiously optimistic over Daya’s restructuring and turnaround efforts, with the securing of various contracts in recent months reflective of its operational abilities. We reserve comments pending details of the plan however. Our target price continues to be placed under review but with Neutral call maintained. Earnings estimates are left unchanged at this juncture, but present significant downside bias.

  • The Oil and Gas segment reported a lower profit before interest and tax (PBIT) of RM5.4m for 9MFY18, down 70.6% YoY due largely to an impairment loss this year and extraordinary income (from debt waivers) last year.
  • The Technical Services (TS) swung into a pretax loss position of RM9.4m for 9MFY18 from a pretax gain of RM5.3m in the previous corresponding period, also on non-operational issues (ie. allowance for foreseeable losses). Higher value of construction works were completed during the period, though to not much avail.
  • Other updates. The Group’s Memorandum of Understanding with China Energy Engineering Corporation Limited International Company (CEEC) to collaborate in power plant projects and other infrastructure construction projects in Malaysia and Indonesia has lapsed on the deadline date of 24 November 2018, without renewal. This comes as no great surprise however, considering the drying up of both prospects domestically in recent months, while Indonesia is mired in economic challenges of its own. Discussions with Kumul Petroleum Holdings Limited of Papua New Guinea remain ongoing however. Cumulative orderbook still stands at ~RM450m, which should keep it busy for the next 2 years.

Source: PublicInvest Research - 3 Dec 2018

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