• Maintain TRADING SELL (TP: RM1.79). Dayang Enterprise’s (Dayang) 1QFY24 core earnings of RM38.3mn was deemed as within our expectations, coming at 16.8% of our full year forecast and 15.7% of consensus estimate amidst seasonally weak quarter in 1Q. 1Q24 turned to profit from loss of RM15.9mn in 1Q23 driven by greater revenue from both topside maintenance services (TMS) and marine segments. We see low likelihood of earnings surprise in FY24F given that (i) FY23 earnings was bumped up by a one-off gain from reversal of PPE impairment worth RM41.7mn, (ii) higher maintenance activities is expected for Perdana vessels, and (iii) the removal of marine spread from Petronas’ contract would reduce Dayang’s ability to leverage on its economies of scale. Given its strong stock price performance that has appreciated by more than 100% over the past 12-months, we think this reflects the market’s full optimism on its earnings growth potential in FY24F. Hence, we advise investors to take this opportunity to lock in profit. Maintain Dayang as a TRADING SELL with unchanged TP of RM1.79. Our TP is based on DCF methodology that implies 9x FY24F P/E.

• Key highlight. Strong revenue from TMS segment in 4Q23 continued in 1Q24 as revenue grew by 77.3% YoY to RM139mn. However, this was not unusual as both revenue and PBT margin were actually comparable to 1Q22 level. Meanwhile, marine segment remained firm on its recovery path. The segment PBT came in positive at RM1.2mn which is in stark contrast to LBT of RM22.8mn in 1Q23.

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

• Outlook. As of Mar 2024, the company’s orderbook from call-out contracts is estimated at RM1.7bn (4Q23: RM1.9bn). Management expects a more robust activity in 2Q24 and for the rest of the year especially in MCM and HUC projects.

Source: BIMB Securities Research - 24 May 2024