Dayang’s 1QFY18 core net loss of RM4.2m was below HLIB and consensus estimates. Core net loss narrowed YoY mainly due to higher contribution from Offshore TMS segment, partially offset by weaker performance from Marine Charter segment caused by lower charter rates. Orderbook from Offshore TMS segment currently stands at c.RM2.0bn which represents c.3.4x FY17 segment revenue cover ratio. 12-14 out of a fleet of 16 vessels are employed in 2Q18 and management expect that this fleet utilisation level should continue right through into at least 3Q18. Reduced FY18-19 forecast by 17.4% and 18.8% respectively after imputing lower charter rates and lower vessel utilisation rate. Maintain BUY with lower SOP-driven TP of RM0.67 (from RM0.91) after earnings forecast and balance sheet model adjustments.

Results below expectations. 1Q18 core net loss of RM4.2m was significantly weaker than ours (+RM44.0m) and market expectations (+RM55.0m). The weaker than expected results were due mainly to lower than expected contribution from marine segment.

YoY: 1Q18 core net loss narrowed to RM4.2m (from RM33.2m) mainly due to higher contribution from Offshore TMS segment, partially offset by weaker performance from Marine Charter segment caused by lower charter rates (reduced by approximately 10%).

QoQ: 1Q18 bottom-line reverted to a loss (from +RM0.7m) due to weaker performance from Marine Charter segment caused by lower vessel utilisation rate at 27% (from 51% in 4Q17).

Offshore TMS. Order book from Offshore TMS segment currently stands at c.RM2.0bn which represents c.3.4x FY17 segment revenue cover ratio. The company has participated in the Pan Maintenance, Construction and Modifications Contract tender and management is expecting to win a fair share of the estimated RM8.0bn of jobs that are on offer.

Marine Charter. Low vessel utilisation rate in 1Q18 was due to technicalities experienced by charterers as a result of some pipeline problems. 12-14 out of a fleet of 16 vessels are employed in 2Q18 and management expect that this fleet utilisation level should continue right through into at least 3Q18.

Forecast. Reduced FY18-19 forecast by 17.4% and 18.8% respectively after imputing lower charter rates and lower vessel utilisation rate. We introduce our FY20 earnings forecast of RM59.3m.

Maintain BUY, TP: RM0.67. Maintain BUY with lower SOP-driven TP of RM0.67 (from RM0.91) after earnings forecast and balance sheet model adjustments.

Source: Hong Leong Investment Bank Research - 25 May 2018