Dayang Enterprise (Dayang) reported a strong headline profit of RM107.1m in 3QFY19 compared to the RM48.8m a year ago. Stripping-off exceptional items amounting to RM10.7m, Dayang recorded core net profit of RM96.4m (+139.1% YoY), bringing its cumulative 9MFY19 core net profit to RM144.9m (+113% YoY). The impressive performance was lifted by a +16.7% YoY growth in revenue, coupled with expansion in profit margin by 8.6ppt at the gross level to 42.6% as of 9MFY19. The results exceeded our and consensus expectations, accounting for 94.3% and 97.0% of full-year forecasts respectively. We revise our FY19-21 estimates higher by an average of 6% to reflect the better margins, while also backed by a strong orderbook in hand of RM3.2bn which could last over 3 years. Our TP is adjusted slightly higher to RM1.82 (RM1.80 previously) after the revision, based on PER of 12x over FY20 EPS of 15.2sen. Our Neutral rating remains nonetheless as we see all the positives having already been priced-in.

• Strong 3QFY18 results on improved margins. Dayang recorded the highest quarterly net profit in its history, with core net profit jumping by >100% YoY and 79.5% QoQ to RM96.4m on the back of strong revenue growth of 26.8% YoY and 44.7% QoQ. This is attributed to higher work orders from its MCM and topside maintenance services under the Pan HUC contract as well as marine charter services. This was further supported by the expansion in gross profit margin by 14.8ppt YoY and 5.4ppt QoQ as more lump-sum work orders had been executed during the quarter which enabled the Group to have better cost control and improved efficiencies. Higher vessel utilization of 91% at Perdana had also been achieved in the quarter as compared to 79% and 36% in the 2Q and 1Q.

• Healthy orderbook to maintain momentum. Dayang’s outstanding orderbook remains strong at RM3.2bn, translating to 3.5x of FY18’s revenue. We remain upbeat on its growing orderbook with more job orders expected to come in the near term from “farm-in” contracts. This is on the back of Petronas’ commitment to deploy RM35bn capex in the 2H this year of which 50% (RM17.5bn) will be allocated for domestic investments. Given Dayang’s strong position as a brownfield services specialist and having good track record in handling these similar contracts back in 2013, Dayang could be a beneficiary of this. It would be no surprise if Dayang tops its highest ever orderbook of RM4bn back in 2014.

Source: PublicInvest Research - 25 Nov 2019