DAYANG: Strong Margins Drive Earnings Beat, ‘BUY’ Rating Affirmed

Despite a significant year-on-year decline in core net earnings, a recent research report highlights that a company’s 2025 financial performance surpassed both the investment bank’s forecast and market consensus. The improved profitability was primarily attributed to robust cost efficiencies and a more favorable revenue mix, leading to a stronger-than-expected dividend payout.

Performance Review

For the full year 2025, core net earnings were reported at RM193 million, representing a 36% drop from the previous year. However, this figure considerably exceeded the investment bank’s forecast by 113% and consensus estimates by 118%. The company also demonstrated a commitment to shareholder returns by declaring a 7 sen dividend in the fourth quarter of 2025, bringing the total payout for the year to 14 sen, exceeding the earlier estimate of 10 sen. The outperformance was largely driven by stronger margins, reduced interest expenses, and higher interest income. Notably, the EBITDA margin expanded by 1.6 percentage points to 42%, benefiting from a strategic shift in revenue composition, with marine chartering activities accounting for 50% of revenue, up from 43% in 2024.

Operational Challenges

The overall earnings decline stemmed from a 36% year-on-year decrease in revenue to RM938 million. This was primarily a result of several operational headwinds, including a slowdown in topside maintenance services (TMS) due to fewer work orders, lower vessel utilization (56% in 2025 compared to 65% in 2024) caused by project delays, scheduled dry-docking, and early off-hire of certain accommodation work boats, coupled with softer third-party vessel chartering. The fourth quarter of 2025 also saw a 31% quarter-on-quarter revenue dip, largely due to monsoon-related seasonality, which led to reduced TMS work orders and weaker vessel utilization (52% versus 80% in 3Q25).

Future Outlook and Recommendation

Looking ahead, the investment bank has revised down its EPS forecasts for 2026-27E by 17-24%, factoring in lower maintenance, construction, and modification (MCM) work orders and adjusted vessel utilisation assumptions based on updated activity guidance. Despite potential near-term softness in activity, the company’s 2026E earnings are expected to be bolstered by a strong RM4.8 billion order backlog, providing clear earnings visibility through 2026-28E. With the current forward Price-to-Earnings (PE) ratio at 10x, the investment bank believes that near-term earnings weakness has largely been priced into the stock, presenting an attractive risk-reward profile. The investment bank maintains its BUY rating with a 12-month target price of RM2.01, based on an updated 12x PE multiple on 2026E earnings, which aligns with its five-year mean. Key risks to this positive outlook include unforeseen delays in work orders, a sharp decline in charter rates, and higher-than-expected operating costs.