Anticipating a strong set of numbers in 2Q-3QFY22. We gather that OSV charter rates have increased approximately 3-5% YoY amid sliding OSVs in the market over the years following the slump in oil prices from 2015-2020. We are optimistic that the group’s 63.7%-owned Perdana Pertroleum will turn into the black in 3QFY22. We also expect the group’s blended fleet utilisation rates for its OSV segment to increase significantly to 60-65% in 2Q22 (from 38% in 1Q22). Also, from the published Petronas Activity Outlook 2022, the outlook for OSVs is expected to mildly improve in 2022 with a total of 336 support vessels to be chartered throughout the year (vs. a total of 289 support vessels in 2021) while higher MCM and HUC man-hours are also expected for 2022 (HUC: 6.3; MCM: 11.5) as compared to 2021 (HUC: 4.7; MCM: 8.5). Hence, we reckon DAYANG is on track to post a commendable 2Q-3Q22 results.

OGSE players may play catch-up. Despite improving earnings outlook, DAYANG’s share price has been lacklustre, registering a -16.5% return since the oil price bull run (vs E&P players such as DNEX: +295% and HIBISCUS: +47%). In our view, the distinctive performance between E&P and OGSE (O&G services and equipment) players was mainly due to the lag effect in recognising the earnings from booming oil prices, given that the latter depends on the oil majors’ capex cycles.

Nevertheless, we stress that OGSE players will play catch-up once the capex spending recovers, evidenced by the 2016-2018 O&G bull run cycle, where the OGSE players played a catch-up (Figure#1) after the rally in E&P players amid the recovery of capex spending from oil majors due to earnings recovery outlook. While timing a perfect entry point may be challenging, we note that the oil majors’ capex spending has been recovering steadily after a bump in 2020 (Figure#2). As such, we expect OGSE players will again capture the limelight, and we reiterate a buy-on-weakness on DAYANG.

Pending an ascending triangle breakout. Technically, DAYANG is forming an ascending triangle, signalling a potential new up-trend leg to happen. A successful breakout above the RM1.01 neckline will spur the price toward RM1.10-1.19 area. Cut loss at RM0.86.

Source: Hong Leong Investment Bank Research - 17 Aug 2022