Results

• Below expectations: 4Q16 core net profit came in at RM5.7m, bringing FY16 core loss to RM5.0m, below ours (+RM0.5m) and consensus (+RM30.5m).

Deviations

• Weaker than expected HUC work orders.

Highlights

• YoY: 4Q16 core net profit plunged 75.1% YoY mainly due to (i) weaker Offshore TMS revenue dragged by lesser HUC work orders used and (ii) weaker Marine contribution due lower overall vessel utilisation.
• QoQ: Core net profit weakened by 72.1% to RM5.7m mainly underpinned by (i) seasonally lower marine vessel utilisation and (ii) lower HUC work orders due to monsoon season.
• FY16: The group posted a core loss of RM5.0m in FY16 vs. core net profit of RM105.8m in FY15 mainly underpinned by (i) significantly lower vessel utilisation for Perdana YoY (ii) dip in HUC work orders as its major clients slowed down the activities in view of low oil prices and (iii) higher finance cost as a result of debt consolidation of Perdana?s debts.
• The group has remaining orderbook of RM2.8bn running until 2018. Currently, it has a tenderbook amounting to RM4.0bn (which is believed to be the next round of HUC Pan Malaysia umbrella contract possibly in 2H16).
• OSV vessel utilisation and HUC work orders are expected to pick up in 2017 in view of YoY improvement of oil prices.
• No major CAPEX in assets (OSV assets in particular) is expected in 2017 due to still uncertain O&G industry outlook.

Risks

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

Forecasts

• FY17/18 core net profit forecasts are adjusted upwards by 2%/3% post full year earnings adjustment.

Rating

HOLD (↔)

• While recent improvement in oil prices has somewhat brightened the outlook of O&G players, we believe that it is still too early to get overexcited about Dayang?s prospects as the recovery may not be sufficient to justify valuation rerating in the near term.

Valuation

• Maintain HOLD call with TP raised to RM1.16 from RM1.11 based on 0.8x CY17 PBV post adjustment in full year balance sheet and changes in forecast. Our TP of RM1.16 implies FY17-18 P/E of 24.2x and 14.7x respectively.

Source: Hong Leong Investment Bank Research - 23 Feb 2017