Dayang likely to benefit from offshore support

HLIB noted that many offshore marine services companies have exited the industry, while some had gone bust following the slump in oil prices from 2015 to 2020.

KUALA LUMPUR: Dayang Enterprise Holdings Bhd is expected to benefit from an increase in offshore support vessels (OSV) charter and blended fleet utilisation rates, this year.

Following a conference call with the integrated oil and gas services provider, Hong Leong Investment Bank (HLIB) Research said it is upbeat about the company’s earnings prospects this year.

“The group has guided that the OSV charter rates have increased by a total of 3% to 5% year-on-year as the market has declined over the years,” it said in a report yesterday.

HLIB noted that many offshore marine services companies have exited the industry, while some had gone bust following the slump in oil prices from 2015 to 2020.

“Also, management has guided that the division’s blended fleet utilisation rates have increased substantially to more than 70% in the second quarter of 2022, which is higher than the guided net profit breakeven level of 60% to 65%.“With that, we believe that 63.7%-owned Perdana Petroleum Bhd will return to the black in the second or third quarter of 2022.”

Citing Petroliam Nasional Bhd’s (Petronas) activity outlook for 2022, HLIB Research said the outlook for the OSV segment is expected to be slightly better in 2022, as there are a total of 336 support vessels expected to be chartered throughout the year, as compared to 289 vessels in 2021.

“Petronas has guided that there will be consistent demand for vessels supporting production operations over the next three years.”

Additionally, HLIB said higher hook-up and commissioning (HUC) and maintenance, construction and modification (MCM) man-hours are expected for 2022, as compared to 2021.

“Also last week, Petronas raised its 2022 total capital expenditure guidance to RM60bil.

“As we deem Dayang the market leader for MCM and HUC, we are confident that it will be a major beneficiary of this development.”

Separately, HLIB said Covid-19 served as a major headwind for Dayang and affected the group’s financial performance over the last two years.

“Issues included manpower and labour issues and stringent Covid-19 related standard operating procedures, which resulted in higher accommodation expenses, testing requirements and quarantine time.

“Dayang has guided that these headwinds are waning off in 2022 and the group should be able to execute its jobs more efficiently.”

HLIB noted that Dayang’s current outstanding orderbook stands at RM1.8bil, which will provide earnings visibility until end-2023.

The research house said Dayang also has a tenderbook of around RM800mil.

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