The reported deep 1QFY21 loss is deemed to be broadly within expectation, on anticipation of better quarters ahead given that 1Q is seasonally the weakest quarter of the year for DAYANG. The quarter was mainly dragged by slower recognition of maintenance work orders, coupled with poor vessel utilisations. Moving forward, we expect activity levels to gradually rebound, sustained by the recent recovery of crude oil prices. DAYANG’s maintenance order- book of RM2.5b should also be sufficient to sustain revenue visibility for the next 2-3 years. Maintain OP with TP of RM1.80.

Deemed broadly within expectations. 1QFY21 core net loss of RM34.5m (arrived after adjusting for unrealised forex losses) is deemed to be broadly within expectations against our full-year earnings forecasts of RM87.6m and consensus of RM113m, in anticipation of stronger periods ahead given that 1Q is seasonally the weakest quarter. No dividends were announced, as expected.

Badly hit quarter. YoY, 1QFY21 plunged into loss, dragged by slower recognition of maintenance work orders amidst movement restrictions, while vessel utilisation was also lower at 20% vs. 55% last year. QoQ, the quarter similarly dipped into loss amidst slower maintenance work orders, while vessel utilisation deteriorated from 44% last quarter to 20%. However, take note that 1Q is typically the weakest quarter of the year for DAYANG.

Slow and gradual recovery. The deep loss incurred in 1QFY21 is suggesting that recovery trajectory will be slow and gradual. Nonetheless, in tandem with the current rebound in crude oil prices, topside maintenance and offshore activities are expected to pick up in the coming quarters. DAYANG’s current maintenance order-book of RM2.5b will also be sufficient to sustain revenue visibility for the next 2- 3 years.

Maintain OUTPERFORM, with unchanged TP of RM1.80 – pegged to 1.1x PBV, close to historical mean valuations. Our TP also implies forward PER of 14x. Post results, we make no changes to our FY21- 22E numbers. Our OP call is premised on the group’s potential for a gradual recovery, anticipating a return of job flows.

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 May 2021