ONCE a darling stock, Dayang Enterprise Holdings Bhd has gone very much under the radar in recent times after ‘one-man institutional fund’ Koon Yew Yin a.k.a Uncle Koon began distancing himself from the integrated oil & gas (O&G) service provider around the time Malaysia implemented its first COVID-19 lockdown last year.
In a blog coinciding with the imposition of the movement control order (MCO) 1.0 on March 18 last year, Uncle Koon had projected that the worst would be over for Dayang after its share price plunged from RM2.95 on Feb 20, 2020 to 88 sen within four weeks due a culmination of force and panic selling.
“Many investors are worried that the current oil price slump will badly affect Dayang’s business and reduce Dayang’s profit,” he observed.
“No, it will not! In fact, the oil price slump is good for Dayang’s business. Unlike Hibiscus (Petroleum Bhd), Dayang is not involved in the oil extraction. It is only oil rig maintenance contractor.”
Uncle Koon went on to justify that when oil prices slumped, PETRONAS will have to pump more oil to support Malaysia’s economy, thus awarding more oil rig maintenance contracts to Dayang which is largest and most efficient contractor in the field.
“In this region where PETRONAS has about 100 offshore oil rigs, it looks like Dayang has the monopoly in this business,” projected Uncle Koon.
Fast forward to one-year-and-a-half later, Dayang seems to remain a favourite stock – at least among the analyst fraternity.
Kenanga Research has maintained its “outperform” rating on Dayang with lower target price of RM1.20 (from RM1.80 previously) premised on a trading recovery play which revolves around the economic reopening theme amid the winding down of movement restrictions.
This is despite the company incurring a 1H FY2021 core net loss of RM28.5 mil (arrived at after adjusting for unrealised forex and impairments) which came in below the expectations of the research house’s full-year profit forecast of RM87.6 mil and consensus’ RM82.5 mil.
This is mainly due to weaker-than-expected contribution from the company’s offshore topside maintenance services amid poorer activity levels coupled with higher operating opex due to the COVID-19 pandemic.
“While we are expecting Dayang to continue its recovery trend in the upcoming quarters, we believe on the overall, FY2021 could turn out to be a weaker year than FY2020 as the year has been hugely plagued by the group’s inability to fulfil its work orders given the movement restrictions,” opined analyst Steven Chan in a results review.
Echoing a similar sentiment, PublicInvest Research also retained its “outperform” call on Dayang but with its target price revised downward to RM1.35 (from RM1.77 previously).
“We are of the view that the overall performance for FY2021 could just be a one-off as it is also being impacted by other unexpected events such as total lockdown in Labuan territory for almost two months, and operations of five vessels being halted for between two and four weeks due to COVID-19 infections,” reckoned analyst Nurzulaikha Azali.
“FY2022 earnings onwards will improve on the back of healthy orderbook and improved efficiencies given the gradual relaxation on SOPs post-vaccination.
At 10.47am, Dayang was down 5.5 sen or 5.45% to 95.5 sen with 4.83 million shares traded, thus valuing the company at RM1.11 bil. – Sept 21, 2021
