DAYANG: Energy Sector Outlook Positive Amid Stronger Activity Projections, Favourable Rating Issued
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
The energy sector is poised for a more positive year ahead, driven by anticipated rebounds in key activities and robust project pipelines. A recent investment bank research report indicates an optimistic outlook, with several segments showing significant growth potential over the coming years, leading to a reaffirmed positive investment recommendation.
Performance Review and Key Drivers
In 2025, well plug-and-abandonment (P&A) activity notably exceeded expectations, with 63 wells completed against a projection of 46, demonstrating strong operational execution. The offshore fabrication segment also met its targets, successfully rolling out three fixed structures. This robust performance in critical operational areas highlights the sector’s capability.
However, certain areas experienced softer activity. Hook-up & Commissioning (HUC) activities in 2025 fell short of initial projections, recording 1.9 million manhours against a 6.5 million forecast. Similarly, Maintenance, Construction & Modification (MCM) activities were below expectations and are projected to moderate in 2026. Onshore plant turnarounds also saw fewer projects in 2025 than initially planned.
Future Activity Outlook
The outlook for 2026-2028 suggests a significant ramp-up in activity. HUC activities are expected to see a sharp rebound in 2026, with manhours projected to reach approximately 4.0 million, a 111% increase year-on-year, as deferred projects are carried forward. P&A work is forecast to further increase to 70 wells in 2026 and remain robust, averaging about 80 wells annually over 2027-28.
Petronas also plans to deploy 22 drilling rigs in 2026, a 5% increase, largely driven by higher hydraulic workover unit (HWU) demand. The offshore fabrication segment is set for a robust year with 10 new offshore structures anticipated for rollout. Onshore plant maintenance is also expected to rebound significantly in 2026, with 12 plants slated for turnaround.
Challenges and Investment Perspective
Despite the positive overall outlook, the demand for Offshore Support Vessels (OSVs) is expected to remain subdued in 2026, declining by 2% year-on-year to 190 vessels. This softness is primarily due to weaker HUC and MCM projects, potentially keeping utilization rates under pressure for several OSV providers. Nevertheless, OSV charter rates are expected to remain stable, supported by a shortage of local-owned vessels.
Overall, the sector maintains an “Overweight” rating. For specific entities, the report identifies companies like Uzma, Dayang, and Pantech as key beneficiaries from the anticipated higher P&A, HWU demand, and increased Pipe, Valve & Fitting (PVF) orders, respectively. An investment bank has set a target price of RM0.25, representing a 25.0% upside from the last traded price of RM0.20, reiterating a “BUY” recommendation for the shares.
