Phillip Capital Research said the company’s upcoming results for its second quarter ended June 30, 2024, would likely exceed market expectations.
PETALING JAYA: Oil and gas services provider Dayang Enterprise Holdings Bhd
’s earnings will likely reach a record high this year and into 2025, buoyed by stronger order flows, and higher vessel utilisation and charter rates.
Given the favourable operating environment, the company’s upcoming results for its second quarter ended June 30, 2024 (2Q24), would likely exceed market expectations, according to Phillip Capital Research.
“We expect a strong earnings beat against our earlier RM224mil and consensus RM247mil earnings forecasts for 2024. The strong earnings momentum is expected to be driven by higher work orders, better vessel utilisation, and charter rates amid a tight supply of vessels,” the research house said in a report.
“Dayang’s charter rates have seen an overall increase of 5% to 7% in 2024, following a similar revision in 2023. We gather that all seven of Dayang’s vessels were operational in 2Q24, likely resulting in an overall utilisation rate of over 90%, which is higher compared with the 48% and 72% recorded 1Q24 and 2Q23, respectively,” it added.
Further, Dayang’s 64%-owned subsidiary Perdana Petroleum Bhd is also expected to report stellar earnings in 2Q24, driven by higher vessel utilisation and charter rates.
“We estimate Perdana’s utilisation rate to be about 85% to 90% in 2Q24, compared with 62% in 1Q24 and 69% in 2Q23,” the research house said.
Dayang is expected to release its upcoming 2Q24 results on Aug 22.
“We expect 3Q24 to deliver stronger sequential earnings from a ramp-up in maintenance and hook-up commissioning activity. We expect a sustainable earnings growth trajectory for 2025-2026, with higher contributions from a three-year contract from national oil company Petroliam Nasional Bhd (PETRONAS) awarded in January 2024, valued at an estimated RM1.2bil,” Phillip Capital Research said.
Earlier this year, Dayang had secured two more contract extensions from PETRONAS Carigali Sdn Bhd for the provision of two accommodation work boats: Dayang Ruby and Dayang Opal.
The company is also expected to be among the beneficiaries of accelerated domestic capital expenditure by PETRONAS.
It added that Dayang’s management had guided that service rates could potentially increase further, leading to margin expansion.
“The current oil and gas sector upcycle continues to offer plenty of tender opportunities, such as installation, hook-up and commissioning/maintenance, construction and modification, and tender platform decommissioning packages, potentially worth over RM2.5bil,” the research house said.
It added that Dayang stands a good chance of securing the upcoming Pan Malaysia package as an incumbent player.
Phillip Capital Research reiterated a “buy” rating on Dayang, raising its target price for the counter to RM4.50 from RM3.78 previously. The brokerage said the higher target price, based on 16 times forward earnings, reflects better-than-expected work orders, higher vessel utilisation and charter rates, and margin expansion.
