KEY INVESTMENT HIGHLIGHTS

• Dayang’s reported a net profit of RM78.2m in 4QFY19

• Earnings was boosted by higher profit margins on work orders and high vessel utilization rate of 74% in 4QFY19

• Earnings supported by improved offshore PBT margin of 52.4% from 47.0% in 4QFY18

• Current orderbook at RM4.5b inclusive of Carigali-PTTEPI contract

• FY20F earnings maintained

• Downgrade to NEUTRAL with unchanged TP of RM2.69

Dayang’s 4QFY19 normalised earnings grew by +10.4%yoy to RM84.7m. Dayang Enterprise Holdings Berhad’s (Dayang) 4QFY19 reported net profit came in at RM78.2m. However, its normalized earnings – excluding a one-off professional fee relating to debt restructuring amounting to RM3.7m and an allowance for impairment loss on PPE of RM2.8m, came in at RM84.7m. This brings its FY19 cumulative earnings to RM232.2m which was within our but above consensus’ full-year earnings estimates. Comparing against 4QFY18, revenue was flat year-over-year whilst normalized earnings were higher by +10.4%yoy respectively. Meanwhile on a quarterly sequential basis; revenue and earnings dipped by -20.3% and -12.2%% respectively. This was primarily attributable to the one-off expenses incurred during the quarter under review.

Perdana Petroleum normalized earnings grew by +12.3%yoy to RM10.2m. Perdana Petroleum’s reported a net loss of -RM2.6m in 4QFY19. However, its normalized earnings excluding EI came in at RM10.2m which +12.3% higher year-over-year. This was mainly attributable to improved vessel utilization rate during the quarter at 74% vs 73% in 4QFY18. Its FY19 vessel utilization rate is registered at 70% which is higher than the FY18 utilisation rate of 64%. The higher utilization rate was primarily due to improved work orders/contracts awarded by oil majors during the quarter.

Higher productivity and efficiency boosted margins. Aside from the better revenue recognition from its work orders, the improved earnings recorded by Dayang in 4QFY19 was also attributable to higher productivity and improved efficiencies in work orders performed under its topside maintenance contracts. This had resulted in higher profit margins recorded for the maintenance work orders during the quarter.

Orderbook amounts to RM4.5b as of 21 February 2020. Dayang’s orderbook as at 21 February 2020 amounts to RM4.5b and this is expected to last Dayang until 2025. This is inclusive of its recent win of two I-HUC contracts back in December 2019 from Petronas Carigali and another contract from Carigali-PTTEPI early February 2020. The contract from Carigali-PTTEPI is for a period of three years with two-years of optional extensions for the provision of modification works.

Source: MIDF Research - 24 Feb 2020