• Keep BUY and MYR3.82 TP, 75% upside with c.3% FY25F yield. Dayang Enterprise’s core profit strengthened by 77% in 9M24, led by stronger topside maintenance (TMS) work orders and marine segment contributions. The recently awarded three packages of maintenance, construction, modification (MCM) contracts boosted its orderbook to MYR5.3bn, providing earnings visibility over the next five years. The stock is also trading at an attractive 8x FY25 P/E (below -1SD from the 5-year mean).

• Within expectations. At 83% of our and consensus full-year estimates, 9M24 core earnings of MYR253m came in within expectations. No dividend was declared, as expected.

• Results. 3Q24 core profit weakened by 34% QoQ to MYR85m, no thanks to lower offshore TMS work orders (as major contracts are approaching expiry) amidst a lower vessel utilisation rate of 86% (2Q24: 91%). This is after stripping off an unrealised FX gain of MYR50m. 9M24 core earnings still improved by 77% to MYR253m on stronger marine contributions – led by better charter rates, a higher utilisation rate of 76% (9M23: 60%) and thirdparty vessel chartering, as well as stronger offshore TMS contributions.

• Outlook. DEHB’s outstanding call-out contracts are estimated at MYR5.3bn following the award of three packages of maintenance, construction, modification (MCM) contracts valued at an estimated MYR4bn over the next five years. We also expect higher work orders to be called by Petronas Carigali (PCSB) from its 3-year asset integrity findings or AIF contract despite vessel constraints remaining one of the major challenges. Meanwhile, 64%-owned Perdana Petroleum (PETR MK, NR) is aiming to achieve a utilisation rate of >70% (9M24: 76%) in FY25 and still see a potential improvement in daily charter rates due to tight vessel supply. The company is targeting to lock in more long-term contacts next year to ensure earnings visibility over a longer period.

• We maintain our earnings estimates and TP of MYR3.82, which is pegged to an unchanged 15x P/E (above +1.5SD from its 5-year mean). We have also incorporated a 8% ESG discount into our valuation, based on DEHB’s ESG score of 2.6 vs the 3.0 country median. Downside risks: Slowdown in new work orders, weaker oil prices, and higher operating costs.

Source: RHB Securities Research - 22 Nov 2024