I have extracted the following facts which all investors should know:
Quote “We herewith provide an overview of the business operations of
Dayang, the financial review of 2018 and the Group’s expectations
on the business going into 2019. Business and Operations Review
Our business operations in 2018 witnessed a steady improvement
throughout the year as business activities picked up substantially in
the second half of 2018 as the work orders from Maintenance,
Construction and Modifications Contract (MCM) and Pan Hook-up
and Commissioning Contract (Pan HUC) came in. Dayang has been
focusing on execution and ensuring smooth and timely delivery of its
jobs to our key clients as track record is of utmost importance in this
competitive industry. After the slow start during the first quarter of
2018 as inclement weather slowed down work progress resulting in
low vessel utilisation, we experienced a more robust work flow in the
remaining of 2018. Vessel utilisation of Perdana Petroleum improved
from a low of 27% in the first quarter of 2018 to 73% in the fourth
quarter of 2018. On a full-year basis, vessel utilisation was stronger
at 64% in 2018 as compared to 52% in 2017.
Throughout 2018, we have deployed our resources to support our
clients in executing the HUC, EPCC and maintenance works, including
the vessels which are sourced from our subsidiaries, namely Perdana
Petroleum and DESB Marine. Our diversified portfolio of client profile
has helped to offset the impact of a slower first half of 2018 and
more work orders started to flow stemming from more maintenance
activities in the second half of 2018. The Group remained steadfast
with its existing strategies focusing on its core businesses,
operational efficiencies and managing cash flows. The positive
results of cost optimisation were also reflected in 2018 as we
enjoyed economies of scale which expanded our profitability given
our relatively low fixed cost despite much higher revenue. The
synergistic tie-up with Perdana Petroleum has ensured Dayang with
access to adequate and reliable vessel supply to position itself to
take on engineering and construction projects as the combined
expertise of Dayang and Perdana Petroleum will further enhance its
competitive advantage. This could also help to set the platform for
our future strategic venture into engineering projects, offering
integrated offshore services to our valued customers. Based on the
current work orders received from the oil majors and the work
planning activity programs that are on hand currently, we envisage
2019 to be another good year for us to showcase the much-
anticipated synergies between Dayang and Perdana Petroleum.
A major milestone that Dayang has achieved in 2018 is the multiple
Pan MCM contracts secured from a number of production sharing
contractors in Malaysia including the likes of Murphy Oil, Nippon Oil
and Roc Oil. The five-year MCM jobs, estimated at RM1.5-2.0 billion,
clearly illustrated the strong confidence that the customer has on
our execution capability and also our competitive edge. In November
2018, Dayang together with Gujurly Inzener, its local partner in
Turkmenistan, via a joint venture company, were awarded a contract
for the provision of facilities maintenance support for Petronas
Carigali (Turkmenistan) Sdn Bhd. The value of this contract is
estimated to be around USD100 million which covers a three-year
period effective from 1 January 2019 to 2020 with an option to
extend for another year. FINANCIAL REVIEW For the financial year
2018, Dayang Group registered one of the best earnings in our long
history as a leading oil and gas player in Malaysia. Our net profit after
tax came in at RM160 million, compared to a net loss of RM145
million in the financial year 2017. What makes the strong financial
results more remarkable is the fact that we achieved the stellar
performance under an environment of a relatively more subdued oil
price. Also, this has taken into account the losses at Perdana
Petroleum which recorded a net loss attributable to shareholders of
RM41 million, underlying the solid financial performance from
Dayang’s core operating business unit.
Our financial year 2018 revenue grew by 35% year-on-year to a
record high of RM938 million from RM695 million, reflecting the
robust work orders from our key customers as well as improved
vessel utilisation rate. We are particularly delighted that there is a
vast improvement in our gross margin which grew to 41% in the
financial year 2018 as compared to 31% in during the financial year
- This clearly demonstrates the economies of scale of our
operation within Dayang Group. In tandem with our earnings
recovery, Dayang’s balance sheet also strengthened further as our
net gearing level improved to 0.90 times in 2018 from 1.16 times in
2017, thanks to the strong operating cash flow which helped to pare
down our borrowings significantly. Cash flow generated from
operating activities came in at RM310 million which was higher than
preceding year’s RM221 million. In terms of shareholders’ fund, it
has increased to RM1.12 billion from RM960 million in the preceding
year, reflecting our improved financial performance in 2018. We are
optimistic that the group will continue to register strong earnings
going forward. Corporate exercise There was no cash dividend
proposed for the financial year 2018 as we remained focus on
maintaining a sustainable balance sheet via careful cashflow
management. As at 31 March 2019, Dayang’s share price stood at
RM1.39, gaining 71.6% over the last 12 months. Our market
capitalisation has staged a strong rally since the beginning of 2019 as
investors began to appreciate the turnaround in our financial
performance. We would like to highlight that we will continue to
have shareholders’ value at the top of priority by working
conscientiously to deliver the best possible results. For Perdana
Petroleum, it has received approval from the Corporate Debt
Restructuring Committee (CDRC) of Bank Negara Malaysia for our
application for the assistance to mediate between the company and
its financiers/creditors. We are now focusing on finalising the
proposed debt restructuring scheme which together with a
comprehensive corporate exercise to be undertaken at Dayang
Group, will now be fast-tracked to be completed within the next 12
months.
Prospects
Fellow shareholders, we believe that Dayang will continue to deliver
a commendable performance in 2019 after the turnaround in 2018.
We are looking forward to finalising the restructuring scheme for
Perdana Petroleum which has always been a strategic holding for our
long-term vision of being a regional champion. We are hopeful that
Dayang will return to its glorious days in the not-so-distant future as
we carefully execute our long-term business plans. We still have call-
out contracts estimated at RM3 billion which is expected to last until
- In addition, we are awaiting the results of some tenders for
contracts with oil majors that are still under evaluation. We are
hopeful of a favourable outcome for the tenders as Dayang could
leverage on its strong outstanding track record to offer value-added
services to its customers.
Unquote !!
Conclusion:
Based on the large volume traded every day, Mr Ooi Teik Bee and I strongly believe there are big institutional investors slowly accumulating this share. Moreover, the company should like the price to go higher for right issues and share placement.
Based on the above facts, obviously the company will report increasing profit in next 2 quarters-thus complying with my golden rule for share selection. We believe after the announcement of the next 2 quarterly results, the share price should be Rm 2.00.