CIMB Research has cut its FY25 and FY26 earnings forecasts for Dayang by 26% and 25.5%, respectively.
PETALING JAYA: Dayang Enterprise Holdings Bhd
’s outlook is susceptible to any cuts in Petroliam Nasional Bhd’s (PETRONAS) capital expenditure (capex).
Also, potential delays in work orders and renegotiations of contract terms or pricing by PETRONAS could exert downward pressure on Dayang’s profit margins, said CIMB Research.
Dayang’s forward order book forecasts may also be impacted by ongoing negotiations between PETRONAS and Petroleum Sarawak Bhd (Petros) over gas distribution in Sarawak.
“This development could potentially slow PETRONAS’ capex rollout from next year,” the research house said in a report yesterday.
As a result, CIMB Research has revised downward its earnings forecasts and profit margin projections for Dayang.
While it maintained its “buy” call on the stock, the target price (TP) has been slashed to RM2.78 from RM4.30 previously.
“To reflect the concerns over a potential cost-cutting exercise by PETRONAS, we cut our financial year 2025 (FY25)-FY26 revenue forecasts by 11%, and reduce our gross and net profit margin projections to 38% and 19.2%–19.6%, respectively, from 44% and 23.1%,” it said.
Following these changes, CIMB Research has cut its FY25 and FY26 earnings forecasts for Dayang by 26% and 25.5%, respectively.
The research house noted that these revised assumptions are based on previous sector downturns, where lower PETRONAS capex had adversely affected Dayang’s performance.
Following the earnings revision, it pointed out that the lowered TP now reflects a reduced price-to-earnings ratio (PER) of 14 times the FY25 forecast, down from 16 times previously.
“The lower PER multiple takes into our forecasts for slower earnings growth post FY25 onwards, following the robust performance in the current cycle.
“At the current price, Dayang trades at 11 times FY25 forecast PER and this represents a 21.4% discount to its five-year mean,” the research house said.
Despite these adjustments, the “buy” rating is maintained on compelling valuations, solid exposure, proven expertise in brownfield maintenance and a strong net cash position, which provides substantial capacity for order book expansion.
For the third quarter ended Sept 30, 2024, Dayang’s net profit increased to RM134.94mil from RM76.38mil in the previous corresponding period, while revenue improved to RM448.51mil from RM343.76mil a year earlier.
