• Current high vessel demand is expected to persist, with further potential DCR upside

• Strong earnings visibility backed by record-high RM5.2bn order book

• Maintain BUY rating with RM4.50 target price. Dayang is our top sector pick.

Positive vessel chartering outlook

Dayang recorded a 9M24 revenue of RM1.1bn (+51% YoY), with 36% of its revenue contributed from the vessel chartering segment. This marks a significant increase from its historical 5-year average of 20%, reflecting strong demand for vessel chartering to support offshore O&G activities. Its 64 %-owned subsidiary, Perdana Petroleum, reported a 9M24 revenue of RM361m (+63% YoY), of which 28% was contributed from third-party vessel chartering. Dayang deploys two vessels for the Asset Integrity Findings (AIF) project and actively seeks additional capacity to meet work demand amid supply tightness. We expect the current tightness to persist and sustain the high daily charter rates (DCR) moving into 2025, with no new fleet additions planned for Malaysian waters.

Offshore platform decommissioning packages up for grabs

Dayang has secured the largest share of the Pan Malaysia MCM package, winning three packages and capturing c.40% of the total RM8-10bn value. Dayang is currently bidding for the new offshore platform decommissioning projects, covering Peninsular Malaysia, Sabah, and Sarawak, with each contract lasting three years. We gather that Dayang is the only company invited to tender for all three packages. If all three packages are secured, this would boost the current order book by an additional RM3bn (+58%), with the award expected in 2H25. Given Dayang’s position as an incumbent player in Sarawak, we believe it stands a good chance of securing the Sarawak package, which is valued at c.RM1.4bn.

Reiterate BUY with RM4.50 target price

We reiterate our BUY rating and RM4.50 target price, based on a target 16x PE multiple applied to 2025E EPS. We remain bullish on Dayang’s earnings prospects, underpinned by its record-high order book of RM5.2bn, which should alleviate investor concerns over the impact of Petronas’ capex reduction. Dayang is trading at an attractive 8x 2025 PE. Key risks to our BUY call include lower-than-expected work orders, higher operating costs, and a sharp decline in global oil prices.

Source: Phillip Capital Research - 25 Nov 2024