RHB Research is positive about Dayang Enterprise’s contract win for the provision of its accommodation workboat, as it provides better certainty over vessel utilisation in the financial year 2023 future. This was stated in the recent Small Cap ASEAN Research report.
Dayang Enterprise Holdings Berhad (Dayang) (712243-U) is an investment holding company that has three wholly owned subsidiaries under its wing — Dayang Enterprise Sdn Bhd (DESB) (61505-V), DESB Marine Services Sdn Bhd (DMSSB) and Fortune Triumph Sdn Bhd (FTSB).
Daily charter rates are also guided to be better. Despite the anticipation of a seasonally weaker quarter one of 2023, RHB Research remains upbeat on Dayang Enterprise’s outlook for 2023, based on the back of robust work orders and better revision rates.
Dayang Enterprise also announced a contract win for the provision of its accommodation workboat, Dayang Berlian from Petronas Carigali. The contract duration is c.207 days from 17 Feb 2023 with an option to extend up to 90 days.
This is the fourth contract win announced subsequent to the three contract wins for three other accommodation work boats – Dayang Ruby, Opal and Zamrud at the end of last month.
RHB Research understands that the daily charter rates are now above RM 70,000-RM 90,000 per day depending on the specification and vessel conditions. This represents a decent improvement from the RM 50,000- 70,000 per day range a year ago.
Meanwhile, Dayang Enterprise’s subsidiary Perdana Petroleum is likely to register stronger year-on-year but lower quarter-on-quarter vessel utilisation in quarter one of 2023 (quarter one of 2022’s 33%; quarter four of 2022’s 60%).
Overall full-year vessel utilisation could potentially improve to 65% (from 59% in 2022) as quarterly utilisation is likely to accelerate to >80% in quarter two to quarter three of 2023, backed by higher upstream activities.
Most vessels are either on spot charters or short-term contracts, and RHB Research also understands that about six vessels will be chartered to Dayang Enterprise for its in-house jobs.
RHB Research maintains their earnings estimates as they have imputed vessel utilisation of 65-66% in the financial year 2023 to 2024 future. Their transfer price remains unchanged at RM 1.73 based on 14x financial year 2023 future price-to-earnings ratio, or +1 standard deviation from its 5-year mean. There is also a 2% ESG discount applied as per our in-house proprietary methodology.
Dayang Enterprise’s outstanding call-out contracts are estimated at RM 1.4 billion as of quarter four of 2022. RHB Research expects quarterly earnings to remain subdued in quarter one of 2023 as the bulk of the mobilisation work will kick-start in March.
They also expect its maintenance, construction and modification work orders to ramp up this year, in accordance with Petronas’ guidance.
Downside risks identified are the decline in new work orders, softer oil prices (which could limit clients’ spending), and higher operating costs.
