• Downgrade to HOLD (TP: RM1.79). Dayang Enterprise’s (Dayang) 9M23 core earnings of RM141mn (+19% YoY) was below our estimate but came ahead of consensus at 63% and 88% respectively. 3Q23 core earnings rose 18% YoY due to higher daily charter rate (DCR) in marine segment. The company declared an interim DPS of 1.5sen. We cut our FY23F earnings forecast by 19% to RM181mn on weaker than expected revenue from topside maintenance service (TMS). The stock price has hit our previous TP of RM1.78, hence we downgrade our recommendation on the stock to a HOLD (from BUY). Our TP is revised slightly higher to RM1.79, nonetheless, as we roll over our valuation to FY24. Our TP is based on DCF methodology and implies 9x FY24F P/E.

• Key highlight. 3Q23 core profit grew 18% YoY to RM76mn mainly driven by stronger marine segment that benefit from higher DCR and higher offshore activities from maintenance contract. Dayang’s vessel utilisation rate was largely similar to 2Q23 at 80% but the segment revenue grew 49% YoY to RM164mn, implying a 49% YoY growth in DCR. On TMS front, 9M23 revenue declined 27% YoY to RM449mn, falling short of our estimate of RM704mn. Nevertheless, the company declared an interim DPS of 1.5sen which is similar to 3Q22. This implies a payout of 14%.

• Earnings forecast. Following weaker than expected earnings in 9M23, we cut FY23 earnings forecast by 19% to RM181mn. However, no change is made to FY24/FY25F forecast at RM228mn/RM262mn.

• Outlook. As of Sep 2023, the company’s orderbook stood at RM950mn which is comprised of maintenance contracts with existing clients up until end 2024. The company is bidding for new contracts that will commence in 2025 to boost its orderbook. We believe the company will be able to maintain its market share in the offshore platform maintenance space leveraging on its strong track record and supported by its large fleet of vessels.

Source: BIMB Securities Research - 24 Nov 2023