Dayang’s 4Q21 core profit of RM42.2m (QoQ: +114%, YoY: -141%) and FY21 core profit of RM43.3m (-46% YoY) came in above expectations based on our and consensus full-year net profit forecasts of RM9.1m and RM10.8m respectively. Key variance against our forecast was due to higher than expected blended FY21 vessel utilisation rate for its OSV segment. We expect Dayang’s performance for the next quarter (1Q22) to be subdued due to the monsoon season, affecting both its topside and OSV divisions. No change to our FY22- 23F earnings estimates. Maintain HOLD with an unchanged SOP-derived TP of RM0.89, where we value its offshore division at 15x P/E and 0.75x P/B for its OSV segment.

Above expectations. Dayang registered a 4Q21 core profit of RM42.2m (QoQ: +114%, YoY: +141%), bringing FY21 core profit to RM43.3m (-46% YoY). The latter has been adjusted for EIs amounting to -RM319.5m mainly comprising of impairment losses (-RM348.8m) which was largely attributed to a kitchen sinking exercise for Perdana Petroleum. The results beat ours (FY21: RM9.1m) and consensus’ (FY21: RM10.8m) expectations. Key variance against our forecast was due to the higher than expected blended FY21 vessel utilisation rate for its OSV segment.

QoQ. Core profit more than doubled QoQ in 4Q21 to RM19.7m and we believe that this was due to higher profit margins from the group’s job mix – of which operating profits improved by 19% QoQ.

YoY. Core profit also more than doubled YoY in 4Q21 and this was due to: (i) higher estimated blended vessel utilisation of 75% in 4Q21 vs. 44% in 4Q20 – which boosted the Marine Charter division’s revenue by 83% YoY.

YTD. FY21 core profit of RM43.3m dipped 46% – and we believe that this was due to lower operating margins on the back of stringent Covid-19 SOPs (mainly staff quarantine costs).

Outlook. We expect Dayang’s performance for the next quarter (1Q22) to be subdued due to the monsoon season, which will affect both its topside and OSV business divisions. While we expect the group’s performance to pick up from 2QFY22 onwards, we note that Dayang is still struggling to manage its Covid-19 related expenses, which may crimp the group’s profit margins in FY22. Also, we highlight that the group will be focusing on turning around its 63.7%-owned Perdana Petroleum (which is essentially the group’s Marine Charter/OSV business segment) in FY22, which we view as a positive strategy going forward but will require some time to accomplish. Dayang’s order book as at end-December 2021 stood at RM1.9bn (from RM2.1bn as at end September 2021).

Forecast. We make no changes to our FY22-23F earnings estimates.

Maintain HOLD, TP of RM0.89. We maintain our HOLD recommendation on Dayang with an unchanged SOP-derived TP of RM0.89, where we value its offshore division at 15x P/E and 0.75x P/B for its OSV segment. While we appreciate the group’s initiative and efforts to turnaround its 63.7%-owned Perdana Petroleum, we think that this strategy will require some time to accomplish. Given the nature of the business to be seasonally impacted by the bad and rainy seasons, we expect Dayang’s performance for the next quarter (1Q22) to be soft due to the ongoing monsoon season. However, we expect the group’s performance to pick up from 2QFY22 onwards.

Source: Hong Leong Investment Bank Research - 23 Feb 2022