Dayang Enterprise Holdings Bhd managed to climb in recent weeks after hitting a recent low of RM2.02 on Sept 11. The counter rose some 37.5%, having touched a year-high of RM3.09 in June. It has done well coming from a year-low of RM1.43 in December.

Fundamentally, the Sarawak-based oil and gas services firm is on a stronger footing. Its net profit more than doubled (up 103%) to RM131.44 million in the second quarter ended June 30, 2024 (2QFY2024) from RM64.69 million a year earlier, on higher vessel utilisation rates and improved daily charter rates.

It also recorded a net foreign exchange (forex) gain of RM900,000 in the current quarter compared with a net forex loss of RM18.7 million in 2QFY2023.

Revenue for the quarter rose 49.1% to RM455.84 million from RM305.73 million a year ago, on higher vessel utilisation rates of 91% in the current quarter compared with 72% in 2QFY2023.

The shortage of offshore support vessels for offshore production and operations activities continue to be the main reason for higher demand and improved daily charter rates for both own and third-party vessels.

In addition, more work orders/contracts being awarded from oil majors received under topside maintenance contracts also contributed to higher revenue generated

According to consensus expectations, Dayang is forecasted to make net profit of RM295.5 million for FY December 2024 and RM319.8 million for FY December 2025. As it is, the company was profitable in four of the past 5 financial years.

Net profit decreased from the peak of RM230.9 million in FYDec19 but plunged into the red with a net loss of RM316.6 million in FYDec21, but had recovered since. Net profit in FYDec23 was RM219 million. The increase in net profit from FYDec21 was driven by higher revenue and improved margin.

Valuation-wise, this implies prospective PERs of 8.6x this year and 8x next year. Currently it is trading at a PE ratio of 7.7x, which is lower than most peers while its P/NAV ratio of 1.4x is higher than most peers.

Another plus point is that Dayang’s balance sheet is healthy with a net cash position. Such are compelling reasons for investors to be drawn to Dayang and ride on its potential upside.