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Thursday, May 25, 2017

Dayang: Who's Afraid Of A Bigger Loss!

Results Update

For QE31/3/2017, Dayang reported a higher net loss of RM42.6 million as compared to a net loss of RM26.4 million reported in QE31/3/2016. With greater dependence on vessel chartering business, the first quarter has become a challenging quarter as vessel utilization got hammered by the monsoon season.

In addition, bottom-line was affected by lower work orders received (due to the decline in crude oil prices and well as the monsoon season) and realized and unrealized foreign exchange losses of RM2.1 million and RM6.0 million respectively (as opposed to RM41.3 million in unrealized foreign exchange gain in the preceding quarter).


Table: Dayang's last 8 quarterly results


Graph: Dayang's last 14 quarterly results

Prospects

Dayang's comment on its prospect has turned decidedly positive this quarter. It highlighted its contracts in hand of RM2.6 billion as well as tenders outstanding of RM5.0 billion which dovetailed nicely with the expected increased in topside maintenance business as per Petronas Activity Outlook for 2017-2019. Lastly, it offers a reward to its shareholders by distributing its shares in Perdana Petroleum Bhd as a dividend in specie by August this year.


 
Valuation

Dayang (closed at RM1.10 yesterday) is now trading at a trailing PER of 25x (based on last 4 quarters' EPS of 4.42 sen). At this PER, Dayang is deemed fully valued. However, the company's earning may be coming out of a trough and it could pick up steadily in line with improved outlook for the Oil & Gas sector.

Technical Outlook

Dayang appears to have bottomed out at RM0.80-0.90 in late 2016. The share price is likely to recover as its monthly MACD has already hooked up. Since MACD is still in negative territory and +DMI is still below -DMI, I do not expect a strong rally to begin any time soon.

  
Chart 1: Dayang's monthly chart as at May 25, 2017 (Source: ShareInvestor.com)


Chart 2: Dayang's weekly chart as at May 25, 2017 (Source: ShareInvestor.com)

Note: This morning Dayang dropped 10 sen to a low of RM1.00 and recovered convincingly to RM1.09 at the close of the morning session. Investors could have taken advantage of the sudden price drop (induced by the reported net loss) & scooped up the shares.   
 
Conclusion

Despite the seasonally poor financial performance, Dayang is a good stock for long-term investment in view of the recovery in the Oil & Gas sector.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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