DAYANG: Operational Efficiencies Drive Strong Quarterly Performance, Outlook Positive

A leading services provider within the oil and gas industry reported a significant recovery in its third quarter of fiscal year 2025, with core net profit climbing 23.1% quarter-on-quarter to RM70.3 million. This performance was largely attributed to improved vessel utilisation, which rose to 80% from 64% in the preceding quarter, and an increase in work orders under its Topside Maintenance Services (TMS) segment.

Cumulatively, the nine-month FY25 core net profit reached RM136.5 million, surpassing the investment bank’s expectations by 108.7%, though it aligned more closely with the consensus estimate of 78%. Analysts view the robust third-quarter results as establishing a new earnings foundation, reflecting current supply-demand dynamics and activity levels under recently secured maintenance contracts during the peak season.

Performance Review

The Marine Charter segment was a key driver of the recovery, experiencing a 20.1% quarter-on-quarter increase in segment profit. This uplift was primarily supported by enhanced offshore execution, following project commencement delays by oil majors in the prior quarter. However, the company’s year-on-year earnings performance saw a decline, primarily due to a sharp reduction in third-party chartering income as foreign-flag vessels were redeployed to other regions offering more attractive daily charter rates. Despite the domestic vessel market experiencing tight supply, the upside on local daily charter rates remains constrained, indicating that overall activity requirements are still lower year-on-year.

Similarly, the Offshore TMS segmental profit rose 6.9% quarter-on-quarter, fueled by higher work orders following previous project delays. Nevertheless, its profit decreased 44.4% year-on-year, affected by reduced activity levels and the transition into the new maintenance contract cycle that began in November 2024. The current activity levels are seen as the “new normal” for the peak third-quarter season, shaped by evolving contracts and industry conditions.

Future Outlook and Recommendation

While operational improvements are evident, overall activity levels continue to lag behind previous peaks. The challenging landscape includes ongoing risks of work order execution delays, with oil majors likely to maintain spending austerity to preserve cash flow amidst a weaker oil price outlook.

Despite these challenges, the outlook remains positive. The investment bank has revised its FY25F-27F earnings forecasts upwards by an average of 29.5%, reflecting a stronger utilisation outlook and a more stable pipeline of work orders. Consequently, the bank has upgraded its recommendation to Trading Buy with a higher target price of RM1.90 (previously RM1.58), based on a sum-of-parts valuation.