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Author: PublicInvest   |   Latest post: Mon, 24 Jun 2019, 10:33 AM

 

Daya Materials Berhad - Gloomy Skies

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The Group announced that it is currently facing 2 new legal cases with regard to default on loan repayment obligations. Considering its current financial plight, this comes as no great surprise. Finalisation of its regularisation plan bears greater importance, now more than ever, given its RM246.12m in borrowings as at 30 Sept 2018 which may or may not bring up further cases of such nature. The Group had recently applied for a ~6-month extension (till August) to submit its plan. While we are cautiously optimistic over the turnaround efforts, we are increasingly wary of these impediments posing difficulties for the Group to secure new contracts. Pending further clarity, our valuation remains under review with Neutral call retained. Earnings estimates continue to have significant downside biases.

  • The first case involves 58.5%-owned subsidiary Daya Proffscorp Sdn Bhd which has defaulted on its hire purchase payments to Maybank. Discussions have been ongoing, with an understanding being reached for the Group to undertake keeping all accounts one month-in-arrears, to which Maybank will then withdraw all legal action. Case mention has been postponed to March 18 pending regularisation of the facility with Maybank. The Group, understandably, is addressing this as part of its entire financial regularisation plan which amongst others will involve asset disposals and asset monetisation, following which it will then be able to fulfil all obligations.
  • The second case involves wholly-owned Daya Maritime Limited and a USD12.7m Islamic financing facility taken from EXIM Bank as part of its venture into the offshore subsea business, but which it has since exited to much financial “carnage”. Given the Group’s travails over the last year or so, it has therefore been unable to make good on scheduled payments in accordance to terms of the facility. That said, it has been in constant engagement with EXIM Bank to discuss on restructuring and payment plans in conjunction with its regularization plan. EXIM Bank’s claim has now amounted to USD14.5m, inclusive of late penalties and legal costs.
  • Clock is ticking. The Group has recently applied for a ~6-month extension to submit its regularization plan. In mid-January, the Group announced a debt restructuring exercise which incidentally was also a precursor to its PN17 regularization plan which will also involve a proposed capital reduction exercise and a proposed rights issue of new shares with free detachable warrants amongst others. With RM246.12m in total borrowings as at 30 September 2018, and in particular RM83.1m in redeemable convertible unsecured bonds already due, one can expect a significant ballooning of its share base when the full regularization plan is announced.

Source: PublicInvest Research - 28 Feb 2019

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