Results

• Within Expectations: 4QFY15 core PATAMI came in at RM23m, bringing FY15 core PATAMI to RM105.8m, broadly within ours and consensus forecast at 107% and 105% respectively.

Deviations

• None.

Highlights

• 4QFY15 core PATAMI (excluding impairment & write-down on Perdana worth RM64.6m and fair value gain of RM109m) fell 26.2% YoY mainly due to low value of work orders for Dayang’s core HUC business and higher losses recognition from Perdana arising from lower vessel utilisation.

• For FY15, Dayang’s core PATAMI weakened by 40.7% YoY due to several factors: (i) full consolidation of losses from Perdana caused by low vessel utilisation (FY15: 63% vs FY14: 92%) (ii) Higher interest cost due to debt consolidation of Perdana and (iii) slower HUC work recognition in view of weak oil prices.

• Despite the unfavourable short-term outlook for Perdana due to lower average utilisation, the acquisition is a strategic fit for both companies as Perdana’s fleet of vessels will be complementary to Dayang’s HUCC business. This will help Dayang to entrench its position for next round of HUC tender in 2018/2019.

• Debt restructuring for Perdana’s USD-denominated debt is still ongoing and the group intends to refinance the loans with MYR-denominated loans to reduce currency risk for the group. Group is unlikely to take delivery of its 2 upcoming barges (SK317 &SK318) and it has already written down on the deposit paid for the 1st vessel, which is a prudent move for the group under the current environment to avoid further strain on balance sheet and earnings.

• Latest orderbook is about RM3.8bn which will last at least until 2018. However, Timing of revenue recognition is uncertain as the contracts are on call-out basis. Dayang is tendering RM350m worth of contracts with tenderbook expected to expand given submission of several tenders in the next few months.

Risks

• Political risk; Delays in contract disbursement; and Execution risk.

Forecasts

• FY16 forecast is reduced by 1.6% by post full year housekeeping adjustment. FY17 core net profit forecast of RM39m is introduced based on higher work orders for its HUC division and narrower losses on vessels on expectation of improvement in vessel utilisation.

Rating

HOLD

Positives

• solid track record and expertise in HUCC.
• captive market for topside maintenance.

Negatives

• Slowdown in O&G activities.

Valuation

Maintain HOLD call with TP adjusted from RM1.39 to RM1.37 post slight earnings adjustment.

Source: Hong Leong Investment Bank Research - 1 Mar 2016