Pick-up seen in Dayang Q2 earnings

The slew of new contract awards is a sign that the oil and gas sector is en route for a gradual recovery.

PETALING JAYA: Oil and gas (O&G)-related company Dayang Enterprise Holdings Bhd is expected to report weaker earnings for its first quarter of financial year (FY) 2021 but a pick-up is expected from the second quarter.

The pick-up is also in tandem with higher activity levels post the monsoon season besides progressive recovery in sector dynamics for 2021.

Its recent win of a contract from Sarawak Shell and Sabah Shell is viewed positively as it shows that the overall work activities are continuing and the group is able to maintain its vessel utilisation at above 60% currently, said PublicInvest Research.Even though the value of the contract was not mentioned, it is believed to be worth about RM100mil. That pushes the company’s order book to a value of RM2.5bil.

Kenanga said the win would increase the group’s revenue visibility, as well as showcase its job delivery capabilities.

Dayang won a job for the provision of topside major maintenance services under package A.

The two-year contract is the third win for FY21.

This would provide revenue visibility for the next two to three years and would fetch mid-teens operating margins.

The slew of new contract awards is a sign that the oil and gas sector is en route for a gradual recovery.

O&G activities will be more significant this year as oil majors are currently expediting some of the works postponed in 2020 as oil prices remain stable above US$60 (RM247) per barrel of oil, PublicInvest said.

According to Kenanga, Dayang may not be actively tendering for new maintenance jobs as it is still bidding for other jobs besides maintenance.

These included hook-up and commissioning, engineering, procurement, construction and commissioning, onshore jobs, as well as vessel charters.

It is expanding its revenue base, summing up to an estimated tender book of RM500mil to RM600mil, it added.

Both houses have an “outperform” call on the stock. PublicInvest’s target price is RM1.66 a share while Kenanga’s is RM1.51.

Kenanga based its call on the group’s potential for gradual recovery in FY21-22, anticipating the return of job flows. However, it cited risks being weaker-than-expected work orders, lower-than-expected margins, and poorer-than-expected vessel utilisation.

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