This is the second year in a row that Dayang Enterprise Holdings Bhd has bagged The Edge Billion Ringgit Club award for highest total returns over three years among the energy companies listed on Bursa Malaysia.

The Sarawak-based oil and gas (O&G) services group is involved in offshore topside maintenance services; minor fabrication operations; and offshore hook-up and commissioning activities. It also operates marine vessels through its listed subsidiary, Perdana Petroleum Bhd, in which it owns a 63.77% stake.

The group’s largest shareholders include Naim Holdings Bhd with 24.22% equity interest, followed by Datuk Ling Suk Keong with an effective stake of 12.66%. Urusharta Jamaah Sdn Bhd owns 7.97% of the company.

Dayang’s share price rose from 77 sen on March 30, 2018, to RM2.94 in February 2020, before the global equity rout in the following month as the fear of a global economic crisis brought about by the Covid-19 pandemic affected equity markets worldwide. 

Its share price plummeted to a low of 75 sen in March 2020, when crude oil prices dropped to below zero. It then rebounded to close at RM1.46 on March 31, 2021, amid the recovery in energy prices. 

The stock price climbed nearly 91% for the period between March 31, 2018 and end-March 2021. This translated into a 23.8% three-year compound average rate of return to its shareholders — the highest among O&G companies with more than RM1 billion market capitalisation. 

Dayang has a healthy balance sheet, with net gearing of 0.1 times and cash ratio of 1.36 times. The company managed to raise fresh cash of RM88.76 million and RM132.34 million via two private placements in December 2019 and March 2021 respectively.

Its strong balance sheet has certainly put it on a firm footing to withstand not just the industry downturn that had lasted longer than expected but also the headwinds brought by the Covid-19 pandemic. 

In terms of earnings performance, the group’s annual net profit swelled 44% year on year to RM230.9 million for the financial year ended Dec 31, 2019 (FY2019), as full-year revenue breached the RM1 billion mark at RM1.046 billion. 

The O&G services group was among a handful that remained profitable in most of the years during the industry downturn that began in late 2014, following the collapse of crude oil prices. 

Dayang showed resilience as it remained in the black with a net profit of RM57.58 million on revenue of RM731.44 million in FY2020 when the oil market was reeling from the twin shocks of the Covid-19 pandemic and a fall in demand. This helps explain the continued investing interest in Dayang’s shares. 

But the prolonged pandemic eventually took a toll on its performance in FY2021. The group dipped into the red in the first half of FY2021 (1HFY2021) as it was hit by movement restrictions and impairment loss on its assets.

For the first six-month period ended June 30, Dayang posted a net loss of RM49.43 million or 4.4 sen per share. Revenue came in lower at RM243.74 million, down 29% from RM343 million in 1HFY2020.

Another factor that dragged on its performance is its subsidiary Perdana Petroleum, which is heading towards its seventh consecutive year of losses in FY2021, even though the unit had been Ebitda (earnings before interest, taxes, depreciation and amortisation) positive from FY2018 to FY2020. 

Perdana Petroleum, which operates 16 vessels, saw its vessel utilisation rate fall to 36% in 1HFY2021, from 51% in 1HFY2020. In view of that, analysts have adopted a cautious view on Dayang, expecting its annual earnings for FY2021 to be lower than in FY2020, but pointed to a gradual pickup in upstream O&G activities from FY2022 onwards.

“Earnings from FY2022 onwards will improve, however, on the back of a healthy outstanding order book of RM2.3 billion as well as improved efficiencies given the gradual relaxation on SOPs post-Covid-19 vaccinations,” PublicInvest Research says in a September note.

In its results note, Hong Leong Investment Bank Research says Dayang should see a decent recovery in terms of its maintenance, construction and modification and integrated hook-up and commissioning activities from the third quarter of 2021 (3Q2021) onwards. “Moreover, its cost optimisation measures carried out in FY2020 should be able to cushion any unforeseen decreases in work activity,” says the research house.