Dayang Enterprise (Dayang) 1Q23 bottomline turned to a core loss of RM19mn no thanks to weaker topside maintenance services  (TMS) segment amidst monsoon season. Notwithstanding, we expect earnings respite from 2Q23 onwards as the company has  begun mobilising its assets for offshore campaigns since March  2023. We still view the company as one of the main beneficiaries of  Petronas’ higher capex leveraging on its position as the leading brownfield offshore maintenance service provider. Hence, maintain our BUY call on Dayang with unchanged TP of RM1.78.

• Within expectation. 1Q23 core loss of RM16mn was within our  expectation, given 1Q is a seasonally weakest quarter due to  monsoon weather.

• Dividend. No dividend is declared as expected.

• QoQ. Revenue dropped 49% due to lower vessel utilisation and lower  work orders received from maintenance contracts no thanks to  monsoon weather. This caused its bottomline turning to a core loss  of RM16mn.

• YoY. Revenue declined by 30% driven by lower work orders from oil  major. The revenue from HUC and MCM contracts decreased by 41%  to RM78mn. Meanwhile, revenue from charter of marine vessels was  largely flattish at RM22mn as utilisation was at uninspiring 26%  (1Q22: 25%).

• Outlook. The company has started mobilising its assets for offshore  campaign starting March 2023. Hence, we expect a strong pick-up in  earnings beginning 2Q23 onwards. The company’s orderbook stood  at RM1.3bn as of March 2023.

Our call. We maintain a BUY call on Dayang with an unchanged DCF-derived TP of RM1.78. This implies 9x FY23F P/E. We like its leading  position in brownfield offshore maintenance services which will  benefit from the expected pick-up in Petronas’ capex spending.

Source: BIMB Securities Research - 24 May 2023