• Dayang Enterprise Holdings Bhd’s (Dayang) 2QFY17 losses widened at –RM48.1m

• Vessel utilisation rate for Perdana Petroleum however surged to 62% in 2QFY17

• Total impairments on assets for 6MFY17 at –RM50.4m

• Total orderbook still remains strong at approximately RM2.3b – burn rate to last into 2019

• Maintain NEUTRAL with a revised target price of RM0.83

Losses widened from impairments. Dayang’s 2QFY17 losses widened to –RM48.1m, as –RM50.4m of PPE was impaired along with forex losses amounting to –RM16.5m recorded in the quarter. The company’s normalised earnings for 2QFY17 is at +RM18.8m. Excluding the exceptional items, Dayang’s 6MFY17 normalised losses is at – RM15.9m.

Higher work orders secured. 2QFY17 revenue increased by more than +70%yoy to RM191m as higher value of work orders were received and executed. In addition, overall vessel utilisation rate for 2QFY17 and 6MFY17 were 62% and 44% respectively.

Current orderbook. Dayang’s current orderbook currently stands at RM2.3b lasting through into 2019. The company’s tenderbook is in the tune of approximately RM4b. The bulk of the orderbook will be calledout in 2018 and into 2019.

Frontrunner for MCM works. We remain sanguine that Dayang will be one of the frontrunners for the Petronas maintenance, construction and modification (MCM) umbrella contracts which are worth approximately RM5b in totality as Dayang has: (i) 7 work barges with an average age of 4.7 years old and; (ii) 9 work boats with an average age of 5.9 years old. All of which are fit for purpose, within the stringent specifications required by Petronas and its production sharing contractors.

Impact on earnings. Due to the persistent tough operating environment and threats of further impairments, we are fine tuning our FY17 and FY18 earnings forecasts to RM24.4m and RM44.7m respectively.

Maintain NEUTRAL. We are maintaining our NEUTRAL stance with a revised target price of RM0.83 per share. At current market price level, we opine that further upside potential is limited. Nonetheless, we are still positive on Dayang as we expect the company to perform well moving forward into FY18 premised on: (i) expected positive earnings from higher callouts; (ii) strong stable orderbook from top tier clients; (iii) strong frontrunner for Petronas MCM works and; (iv) undemanding trading valuation. Our valuation is premised on PER18 of 12.5x pegged to EPS18 of 6.6sen. The target PER17 is based on a 0.5-standard deviation discount to the company’s five-year average rolling PER of 15x.

Source: MIDF Research - 24 Aug 2017