Dayang’s 1Q21 core loss of -RM24.5m (QoQ: RM17.5m, YoY: RM20.9m) was below our (FY21f: RM141.6m) and consensus’ (FY21f: RM113.0m) expectations due to a (i) more turbulent than expected monsoon season and the (ii) incidence of Covid-19, which has affected part of its workforce. Hence, we cut our earnings estimates for FY21/22 by -47.4/30.5% to account for the weaker than expected results. Nevertheless, we believe that MCM and i-HUC activities should see sequential improvements from 2Q21 due to the improving oil market outlook despite higher Covid-19 cases of late. Maintain BUY with lower TP of RM1.60 (from RM1.70) based on 10.0x (from 12.5x) FY22 EPS and 0.7x (unchanged) PB for its OSV segment.

Below expectations. Dayang’s 1Q21 core loss of -RM24.5m (QoQ: RM17.5m, YoY: RM20.9m) was below our (FY21f: RM141.6m) and consensus’ expectations (FY21f: RM113.0m) due to the adverse weather impacts from the monsoon season and the incidence of Covid-19, which has hit Dayang in 1Q21. 1Q21 core loss of -RM24.5m was derived after adjusting for unrealised forex losses amounting to RM3.1m.

Dividend. No dividends were declared during the quarter, none for the year (none SPLY).

QoQ: Dayang slipped into a loss of -RM24.5m this quarter due to (i) adverse weather impacts caused by the Monsoon season which led to significantly lower utilisations for its marine division as marine utilisation stood at 20% in 1Q21 as compared to 44% in 4Q20 and (ii) the incidence of Covid-19 cases for some of its workforce which has affected its operations.

YoY: Dayang slipped into a loss in 1Q21 due to a (i) more turbulent than anticipated monsoon season and the (ii) incidence of Covid-19, which has affected some of its workforce.

Outlook. We are still positive on the outlook of Dayang despite its poor showing in 1Q21 as most contracted assets are only expected to be converted into revenue beginning from 2Q21. Higher and more stable oil prices have also encouraged more capex spending from oil majors and we believe that Dayang would record sequential improvements from 2Q21 until the end of FY21. Furthermore, we expect Dayang to secure the Project Safinah (RM180m) project soon. Its plan to sell 2 of its old AHTS would also lower the age profile of its AHTS fleet for Perdana.

Forecast. We cut our earnings by -47.4%/-30.5% for FY21/22 to account for the weaker than expected results and rising Covid-19 cases of late.

Maintain BUY with lower TP of RM1.60. We maintain our BUY call with a lower TP of RM1.60 as we roll forward our valuations to FY22. Our TP of RM1.60 is based on 10.0x (from 12.5x) FY22 EPS and 0.7x (unchanged) P/B for its OSV segment. We believe that Dayang should see a decent recovery in terms of its MCM and i-HUC work activity from 2Q21 onwards. Moreover, its cost optimisation measures carried out in FY20 should be able to cushion any unforeseen decreases in work activity.

Source: Hong Leong Investment Bank Research - 25 May 2021