PETALING JAYA: Dayang Enterprise Holdings Bhd
is on track for a great financial year 2022 (FY22), says Hong Leong Investment Bank (HLIB) Research.
The positive projection was based on the research house’s recent conference call with Dayang’s key management team, which revealed soaring offshore support vessel (OSV) charter rates, higher blended utilisation rates for its unit Perdana Petroleum Bhd’s OSV fleet in the third quarter (3Q) and better job win and execution prospects in FY22-FY23.
“We expect Dayang’s strong performance to sustain in the third quarter of FY22 (3Q22).
“The group’s management has indicated improved job orders due to fewer Covid-19-related restrictions, lower Covid-19-related expenses and improved projected blended vessel utilisation rates year-on-year (y-o-y) for Perdana Petroleum in FY22,” said HLIB Research in its latest report yesterday.
Based on its ground checks, the research house has gathered that OSV daily charter rates had increased by about 10% to 15% y-o-y as “there have been no new vessels in the market for the past six to seven years because many OMS companies have totally exited the industry”.
From the conference call, the research house noted the group’s fleet blended utilisation rate will continue to increase to 75% in 3Q22 from 66% in 2Q22.
It is targeted to reach a range of about 60% to 65% for the entire FY22 compared with 44% in FY21.
According to PETRONAS Activity Outlook 2022, there will be higher job allocation for the integrated hook-up and commissioning (i-HUC) and maintenance, construction and modification (MCM) and OSV divisions.
Hence, the outlook for OSVs is expected to be significantly better in 2022 as a total of 336 support vessels (production: 138; drilling 198) are expected to be chartered throughout the year as compared to 289 support vessels (production: 151; drilling: 138) in 2021.
PETRONAS indicated that there will be consistent demand for vessels supporting production operation over the next three years.
Also recently, PETRONAS raised its 2022 total capital expenditure guidance to RM60bil from RM40bil-RM45bil previously.
“As we deem Dayang to be the market leader for i-HUC and MCM activities, we are confident that the group will be a major beneficiary of this development,” added HLIB Research.
According to Dayang, Covid-19 has served as a major headwind.
It gave rise to its weak performance in FY20-FY21 due to manpower/labour issues and more stringent Covid-19-related standard operating procedures that resulted in higher accommodation expenses, testing requirements and quarantine time.
With these headwinds waning off in FY22, the group’s management said it should be able to execute its jobs more efficiently.
According to HLIB Research, the group’s current outstanding order book stood at RM1.8bil, which will provide earnings visibility until end-FY23.
It has a tender book of about RM800mil.
Hence, the research house has raised its earnings estimates for Dayang by 14% for FY22, 8% for FY23 and 12% for FY24.
This is mainly to account for a higher profit margin assumption for its topside maintenance in the i-HUC and MCM division for the year, it added.
The research house also maintained a “buy” call on the stock with a higher target price of RM1.26 from RM1.19 previously.
