DAYANG: Strategic Fleet Renewal and Deleveraging Underpin Positive Outlook

A prominent provider of maintenance and support services within the oil and gas industry is strategically navigating a moderating upstream cycle by maintaining disciplined capital allocation and initiating a significant fleet rejuvenation programme. Despite a period of earnings recalibration, the company’s strong financial health and proactive measures are setting the stage for sustained stability and growth.

Performance Review

For the fiscal year 2025 (FY25), the group recorded a core net profit of RM192.9 million, representing a 35.3% year-on-year decline. This performance is largely attributed to the transition into new Modification, Construction and Maintenance (MCM) and Hook-Up and Commissioning (HUC) contracts following the expiry of previous agreements. This period effectively established a “new earnings base” for its offshore Topside Maintenance Services (TMS), with segmental revenue decreasing 42.1% year-on-year. Additionally, Marine Charter revenue saw a 17.6% year-on-year decline due to the strategic redeployment of chartered-in third-party vessels to other regions offering stronger daily charter rates.

Strategic Initiatives and Financial Strength

In anticipation of FY26F, management has embarked on a gradual fleet rejuvenation programme aimed at replacing ageing assets, specifically one accommodation work barge (AWB) and two Anchor Handling Tug Supply (AHTS) vessels. This initiative, which entails an estimated capital expenditure of RM277.7 million over the next two years, is meticulously structured to preserve balance sheet strength, sustain cash flow stability, and protect shareholder returns, supported by resilient operating cash flows and consistent dividend payments.

The group has notably transformed its balance sheet over the past five years, shifting from a net debt position of RM253.5 million in FY20 to a robust net cash position of RM723.9 million in FY25. This significant deleveraging underscores the structural cash-generating strength of its business and provides substantial financial headroom for both capital investments and shareholder returns. An annual dividend per share (DPS) of 14 sen is considered sustainable, further solidifying its commitment to shareholder value.

Market Outlook and Challenges

The upstream outlook remains moderate, with the PETRONAS Activity Outlook (PAO) 2026-2028 indicating revised downward man-hour requirements for MCM and HUC activities, as well as a moderation in offshore support vessel (OSV) demand. This suggests lower activity levels are likely to translate into fewer work orders in FY26F. Furthermore, the Asset Integrity Findings (AIF) contract, awarded in December 2023, has experienced limited execution due to vessel availability constraints, which fall under the client’s responsibility.

Despite these headwinds, management remains confident that overall activity levels will remain stable relative to the FY25 baseline. While the decommissioning programme has seen delays, it is expected to eventually utilise the group’s own vessels, potentially smoothing utilisation and mitigating earnings volatility during seasonal periods. The 64%-owned subsidiary, Perdana, maintains a stable long-term orderbook of approximately RM700 million, providing a meaningful margin of safety against business volatility, even amidst moderate near-term utilisation rates.