Dayang has been awarded a contract for the provision of Maintenance, Construction and Modification (MCM) works for Vestigo Petroleum Sdn Bhd. While no contract value was disclosed, this contract is viable for an 18-month period, with earnings visibility of up to July 2023. This represents the Group’s first contract for FY22, maintaining its balance orderbook at c.RM2bn. This new contract reflects on-going recovery in the oil and gas sector after a less aggressive 2021. This contract will also enable the Group to increase utilisation of its vessels hence improving profit margin. We maintain FY22-24 forecast, having assumed it in our replenishment assumptions. We foresee the Group’s earnings picking up from 2QFY22 onwards in tandem with higher activity levels post-monsoon season. Our Outperform call is affirmed with an unchanged TP of RM1.15.

• The contract is for the provision of Maintenance, Construction and Modification (MCM) works for Vestigo Petroleum Sdn Bhd, a wholly owned subsidiary of Petronas Carigali Sdn Bhd. Works are focused on development and production activities from small, marginal and mature fields in Malaysia and abroad. Contract lifespan is about 18 months, effective from 25 February 2022 until 16 July 2023. While no value has been provided as it is based on work orders issued by the client at a fixed schedule of rates, we estimate this contract will contribute within the range of RM60m – RM90m to the Group’s top line.

• Replenishing orderbook. This represents the Group’s first contract for FY22, maintaining its balance orderbook at c.RM2bn with earnings visibility of more than two years. We believe oil and gas activities will be more significant this year as oil majors are currently expediting some of the works postponed in 2021 amid the current strong oil price environment at above USD100/bbl.

• New contract reaffirms outlook. We are positive over this contract as it reflects the continuation/resumption of overall work activities, and Dayang being able to increase its vessel utilization to around 70%. We keep our earnings forecast unchanged as we have assumed this under our replenishment on work order assumption of ~RM200m/year. We foresee earnings improving this year partly on the back of higher workforce capacity, as well as the absence of the required 14-day quarantine given the relaxation of SOPs, in addition to stronger work flows.

Source: PublicInvest Research - 24 Mar 2022