Dayang recorded a 4Q22 core net profit of RM12.1m (-79% QoQ, -71% YoY), which brought FY22’s sum to RM124.6m (+188% YoY). The results matched expectations at 97%/103% of ours/consensus full-year estimates. We expect Dayang’s performance to sustain in 2023 as recent ground checks has indicated: (i) improved job orders from oil majors amidst elevated oil prices; (ii) improved job contract value across the board for all service provider value chain by more than 15% for MCM and i-HUC works; and (iii) improved projected blended vessel utilisation rates and DCRs for Perdana Petroleum in FY23f. Maintain BUY with a higher TP of RM1.87/share.

Within expectations. Dayang recorded a 4Q22 core net profit of RM12.1m (-79% QoQ, -71% YoY), which brought FY22’s sum to RM124.6m (+188% YoY) after having adjusted for: (i) RM11.0m of insurance claims; (ii) RM1.4m on reversal of impairment of receivables; (iii) RM7.0m on forex losses; and (iv) RM7.3m reversal of impairment loss on PPE. The results matched expectations at 97%/103% of ours/consensus full year estimates.

Dividends. A dividend of 1.5 sen was declared (ex-date: 2 March 2023). Total dividends in FY22 stood at 3.0 sen – which came in as a positive surprise.

QoQ. Core profit declined by 79% QoQ due to: (i) lower work orders for its topside division due to seasonal monsoon weather; and (ii) lower blended fleet utilisation rate of 54% in 4Q22 (vs. 80% in 3Q22).

YoY. Core profit declined by 71% YoY despite higher blended fleet utilisation rate of 54% in 4Q22 (vs. 38% in 4Q21) and this was due to a high base effect in 4Q21 with the construction recognition of Dayang Topaz – which we estimate to have brought in profits of about RM25-30m in 4Q21.

YTD. Dayang recorded a profit of RM124.6m in FY22 (+188% YoY) due to more contract awards and higher work orders from oil majors in the region on the back of the elevated oil price for the past year. The OSV segment’s blended fleet utilisation rate stood at 60% in FY22 (vs. 44% in FY21).

Outlook. We expect Dayang’s performance to sustain in 2023 as recent ground checks has indicated: (i) improved job orders from oil majors amidst elevated oil prices; (ii) improved job contract value across the board for all service provider value chain by more than 15% for MCM and i-HUC works; and (iii) improved projected blended vessel utilisation rates and DCRs for Perdana Petroleum in FY23f. Also, we highlight that the group will be focusing on sustaining the profitability of its 63.7%- owned Perdana Petroleum (which is essentially the group’s Marine Charter/OSV business segment) in FY23f, which we view as a positive strategy. We believe that 2023 will be a golden year for the oil and gas service providers – a laggard to the elevated oil price environment for the past year.

Forecast. Unchanged.

Maintain BUY with a higher TP of RM1.87. We maintain BUY on Dayang with a higher TP of RM1.87/share – based on a 14x P/E multiple on rolled-over FY24f profits, which is in-line with the multiple ascribed to all of the OGSE names in our coverage.

Source: Hong Leong Investment Bank Research - 17 Feb 2023