After a slow start in 1Q23, Dayang Enterprise’s (Dayang) earnings picked up as expected in 2Q23. Overall, 1H23 core PATAMI of RM65.7mn made up 29% and 52% of our and consensus’ estimate respectively. This is after stripping out a non-core unrealised forex loss of RM18.6mn in 2Q23. 1H23 EBITDA margin also improved by 310 bps to 36.1% mainly driven by improved vessel utilisation and daily charter rate (DCR). Seasonally, Dayang will benefit from a more vibrant offshore campaign in 2H of the year, hence potentially boosting its FY23 earnings to surpass RM200mn mark as we expected. If this can be materialised, Dayang would record its strongest earnings since 2019 which may catalyse the stock price to repeat its rally similar to 2H19. All in all, maintain our BUY call on Dayang with unchanged DCF-derived TP of RM1.78 which implies 9x FY23F P/E.

• Within expectation. 1H23 core PATAMI of RM65.7mn (+20.3% yoy) made up 29% and 52% of our and consensus’ estimate respectively. We deem this as within our expectation as Dayang’s earnings are seasonally stronger in 2H of the year.

• Dividend. No dividend is declared as expected.

• QoQ. Revenue almost tripled to RM305.7mn mainly driven by (i) impressive recovery in marine segment led by strong performance by Perdana’s fleet of vessel, and (ii) stronger work orders received from maintenance contract following the end of monsoon weather in 1Q23. Overall, the company achieved stronger vessel utilisation rate of 72% (1Q23: 26%). This led its bottomline turning to profit of RM64.7mn from net loss of RM16mn in 1Q23.

• YoY. Revenue rose 16% driven by stronger marine vessel utilisation rate at 72% against 66% in 2Q22. This had more than offset weaker topside maintenance service (TMS) segment revenue which slipped by 19% or RM45mn.

• YTD. 1H23 headline profit declined 12.6% to RM48.7mn as it was affected non-core unrealised forex loss of RM18.6mn in 2QFY23. Excluding this, core profit rose 20.3% to RM65.7mn mainly driven by higher earnings contribution from marine segment on the back of improved daily charter rate (DCR) and higher vessel utilisation rate of 49% (1H22: 46%).

• Outlook. The company has started to mobilise its assets for offshore campaign starting March 2023. Hence, we expect a strong pick-up in earnings beginning 2Q23 onwards. As at June 2023, the company’s orderbook stood at RM1.19bn.

Our call. We maintain a BUY call on Dayang with an unchanged DCFderived 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 - 25 Aug 2023