• Downgrade to TRADING SELL (TP: RM1.79). Dayang Enterprise’s (Dayang) FY23 core earnings of RM193mn (+81% YoY) was within our estimate but came ahead of consensus at 106% and 120% respectively. 4Q23 headline profit rose 25% QoQ underpinned by reversal of impairment losses on PPE amounted to RM41.7mn following the revision of useful lives of AHTS to 20 years from 15 years. Stripping out non-recurring items, core earnings declined 31% QoQ to RM52mn on lower margin from marine business. The company declared a final DPS of 3sen bringing total DPS for FY23 to 4.5sen (FY22: 3sen). As the stock price has appreciated by more than 60% over the past 12-months, we advise investors to take this opportunity to lock in profit. Hence, we downgrade the stock to TRADING SELL (from HOLD) with unchanged TP of RM1.79. Our TP is based on DCF methodology and implies 9x FY24F P/E.

• Key highlight. Topside maintenance services (TMS) recorded unusually strong 4Q23 revenue of RM218mn as it managed to complete a few job orders despite the onset of monsoon season. However, full year revenue for TMS only grew slightly by 8.4% to RM666.5mn (FY22: RM614.8mn) which is within our estimate of RM705mn. On the other hand, Marine segment posed a strong performance with both revenue and profit more than double YoY to RM386mn and RM107mn respectively.

• Earnings forecast. No change is made to our earnings forecast.

• Outlook. As at Dec 2023, the company’s orderbook from call-out contracts is estimated at RM1.9bn including the newly secured Asset Integrity Findings (AIF) project. The company will be participating in new tender activities while waiting for the outcome of tenders already submitted. 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 - 23 Feb 2024