4QFY20 came in weaker, as anticipated, with the monsoon season resulting in lower work orders and vessel utilisation. Moving forward, in tandem with the recent rebound in crude oil prices, we are expecting DAYANG to see a recovery in workflows, especially in 2022. Maintain MP albeit with higher TP of RM1.45.

Within expectations. FY20 core net profit of RM61m (arrived after adjusting for non-core items e.g. unrealised forex and impairments) came in within expectations at 99% of our, and 95% of consensus full- year, forecast. No dividends were announced, as expected.

Weaker results, as anticipated. 4QFY20 core net profit of RM17m halved sequentially from 3QFY20. Given the seasonal monsoon weather, the quarter saw lower topside maintenance works, as well as lower vessel utilisation (44% vs 62%). Cumulatively, FY20 core net profit was also weaker YoY by 71%. The Covid-19 pandemic and plunge in crude oil prices had led to poorer activity demand throughout the year, resulting in lower topside maintenance workflows and vessel utilisation (53% vs 72%).

Slow and gradual recovery. 2020 saw major capex cuts to from oil majors, leading to large number of job deferments to 2021-2022. Moving forward, with the current rebound in crude oil prices, this could reignite industry spending, which would directly benefit DAYANG. As such, we are anticipating healthy recovery moving forward, especially in 2022, premised on: (i) resumption of offshore maintenance, and hook-up and commissioning activities, and (ii) improvements in margins, given lower expenses incurred to comply with Covid-19 protocols.

Maintain MARKET PERFORM, with higher TP of RM1.45 (from RM1.20 previously). Post-results, we roll over our valuation base year to FY22E. We also up our ascribed valuations a notch to 0.9x PBV (from 0.8x previously) – pricing in an anticipated strong recovery in activities in 2022. Our valuations are also in line with the group’s historical mean valuations. No changes to our FY21E, while we also introduce new FY22E numbers.

Risks to our call are: (i) weaker-than-expected work orders, (ii) lower- than-expected margins, and (iii) poorer-than-expected vessel utilisation.

Source: Kenanga Research - 25 Feb 2021