KUALA LUMPUR (Feb 17): Analysts raised their target prices (TPs) for Dayang Enterprise Holdings Bhd, after the Sarawak-based oil and gas service provider’s latest full-year results came in within expectations, and as they anticipate a positive year ahead.
In a note on Friday (Feb 17), RHB Research analyst Sean Lim said the group’s core earnings surged 1.6 times to RM115 million for the financial year ended Dec 31, 2022 (FY2022) on stronger work orders and better marine vessel utilisation.
Full-year earnings came in at 98% of RHB's expectations and 95% of the consensus, according to Lim. The results were accompanied by a second interim dividend of 1.5 sen.
“Its 4QFY2022 core net profit (for the fourth quarter ended Dec 31, 2022) fell 93% quarter-on-quarter to RM4 million on seasonally lower work orders during the monsoon season and weaker vessel utilisation (at 54% versus 90%),” he added.
Meanwhile, on expectations for more contracts with better rates to be awarded, on the back of stable oil prices of US$80-90 per barrel (bbl), RHB and PublicInvest Research increased their respective FY2023-24 earnings forecasts for Dayang.
RHB lifted its FY2023 earnings forecast by 3% to RM146 million, and by 9% to RM161 million for FY2024, while PublicInvest increased its FY2023 forecast by 9.7% to RM143.7 million, and by 27.9% to RM178.2 million for FY2024.
“We believe the current oil price level of US$80-90 bbl favours the group’s offshore topside maintenance services and marine charter services,” PublicInvest said.
“Based on Petronas’ activity outlook, the requirement for offshore maintenance construction and modification activities in 2023 will be higher by 37% at RM11.9 million man-hours, and will trend higher until FY2025, from just 8.7 million man-hours in FY2022,” it added.
Meanwhile, Kenanga Research maintained its FY2023 earnings forecast of RM130.2 million for Dayang, and pegged a core net profit estimate of RM145.5 for the year.
RHB’s Lim, on the other hand, reiterated his “buy” call on Dayang with a higher TP of RM1.73, from RM1.58 previously, based on an unchanged 14 times FY2023 price-earnings ratio (PER).
PublicInvest maintained “outperform” on the stock with a higher TP of RM1.74, from RM1.58 previously, premised on 14 times PER over FY2023 earnings per share.
Kenanga also kept its “outperform” rating of the counter with a hiked TP of RM1.90, from RM1.70 previously, pegged to an unchanged valuation of 15 times PER over FY2024 earnings, which is at a 25% discount versus the average valuation of offshore maintenance peers back in 2014, when Brent crude oil traded above US$100 per bbl.
“A discount is applied on valuations from the previous oil upcycle, due to the current business climate being much more demanding, as clients are much more prudent in spending unlike yesteryears,” Kenanga reasoned.
Despite the group’s FY2022 earnings being within consensus expectations, Dayang emerged at the tail end of Bursa Malaysia’s top losers in early morning trade on Friday, after falling 11 sen or 7.1% to RM1.44 a share.
At 10.24am, the counter pared losses to RM1.46, still down nine sen or 5.81%, with 4.44 million shares traded. At RM1.46, the group was valued at RM1.68 billion.