CGS has maintained its “Add” recommendation on Dayang Enterprise Holdings Bhd, saying growing energy security concerns should underpin structural demand for brownfield maintenance services despite weaker near-term activity.
The research house said supply disruptions arising from geopolitical conflicts have reinforced the need for exploration and production (E&P) companies to prioritise production from existing fields.
As a result, CGS continues to view brownfield maintenance — Dayang’s core service offering — as a structural requirement, particularly across Malaysia’s mature oil and gas fields where ageing infrastructure and natural production declines require ongoing maintenance to preserve asset integrity and production reliability.
However, near-term activity is expected to remain subdued.
CGS’ channel checks indicate that operators are retiming major maintenance shutdowns where possible as maintaining production continuity becomes increasingly important amid tighter supply conditions.
The research house believes this has weakened demand for large accommodation work barges (AWBs), prompting Dayang’s 64%-owned subsidiary Perdana Petroleum Bhd to cold-stack idle vessels to reduce operating expenses.
CGS has consequently cut its 2026 and 2027 earnings per share forecasts by 8% to 16%, while leaving its 2028 forecast unchanged.
It does not expect a sharp recovery in maintenance spending in 2027-2028, instead anticipating deferred work to gradually normalise and support a recovery in activity from 2027 onwards, following subdued levels in 2025-2026.
Strong Balance Sheet Supports Higher Dividends
Despite the near-term earnings downgrades, CGS has raised its annual dividend per share (DPS) estimate for Dayang to 20 sen from 14 sen, supported by the company’s strong balance sheet and resilient free cash flows.
Dayang had RM583 million in net cash, equivalent to about RM0.50 per share, as at 1QFY26, while CGS expects average annual free cash flow of RM237 million over 2026-2028, excluding growth-related capital expenditure.
Even after factoring in RM260 million in capital expenditure for three newbuild vessels and the higher dividend assumptions, CGS expects Dayang to remain in a net cash position of around RM473 million by 2028.
The research house also noted Dayang’s increasing willingness to return excess cash to shareholders, pointing to rising payouts since 2021 and its maiden first-quarter dividend of 7 sen in 1QFY26.
Valuation Near Historical Low
CGS said the lingering Petronas-Petros dispute remains a key overhang on domestic upstream activity, but believes much of the near-term uncertainty is already reflected in Dayang’s valuation.
It sees limited scope for maintenance spending to decline materially further after the cutbacks seen in 2025-2026.
At the same time, the growing emphasis on energy security and asset integrity should support sustained maintenance requirements over the longer term.
Dayang is currently valued at around 7 times ex-cash 2027 forecast price-to-earnings, near the bottom end of its 13-year historical range, while its estimated 2026 dividend yield of 12.7% provides an attractive income proposition.
CGS therefore reiterated its “Add” recommendation.
Key catalysts identified by the research house include higher dividends, faster order book recognition, potential farm-in opportunities and new contract wins from ongoing tenders.
The main downside risks are prolonged delays to work programmes and an extended impasse between Petronas and Petros.
