KUALA LUMPUR (Sept 19): RHB Investment Bank has revised up its earnings forecasts for Dayang Enterprise Holdings Bhd by 14%-25% for the financial year ending Dec 31, 2023 (FY2023)-FY2025, on the back of stronger offshore topside maintenance services contributions and resilient work orders until the third quarter of FY2023 (3QFY2023).
In a note on Tuesday, the research house said that Dayang stands a good chance to win a portion of the new tender for Petronas’ five-year hook-up commissioning (HUC) and maintenance, construction and modification (MCM) contracts, with another extension option of three plus two years.
“Additionally, we expect the company to win at least one package of the asset integrity backlog clearance project, which could be awarded by 4QFY2023,” RHB said.
Dayang has started some smallish ad hoc works since August that would be recognised in 4QFY2023, according to RHB.
Although work orders are seen tapering off in 4QFY2023 amid the monsoon season, Dayang's management remains fairly bullish on the maintenance space next year.
However, vessel shortages could still be a concern if work orders are being called out aggressively.
“We are guided that marine vessel utilisation in 3QFY2023 is going to improve further from 2Q’s 72% and, as such, is on track to achieve 60%. Average daily charter rates have improved 5% to 7% year-on-year, and could potentially be higher if maintenance activities pick up next year,” the research outfit said.
RHB lifted its target price to RM2.47, pegged at a higher 16 times FY2024 price-earnings from 15 times, and a 6% ESG (environmental, social and governance) discount based on a score of 2.7.
“Such a valuation is to factor in better tender prospects and potential longer tenures for the new round of MCM and HUC contracts. Downside risks include a slowdown in new work orders, weaker oil prices, and higher operating cost,” the firm said.
Dayang shares were up six sen or 3.21% at RM1.93 at the time of writing on Tuesday, valuing the company at RM2.23 billion.