The Sarawak-based oil and gas (O&G) services provider is already facing some fallout from the uncertainties arising from the impasse. Its net profit for the second quarter ended June 30 (Q2 FY2025) plunged 41.7% to RM76.6 million from RM131.4 million a year ago.
Q2 revenue tumbled 41.4% to RM267.4 million from RM455.8 million a year earlier. The drop off was attributed to lower vessel utilisation rates caused by a delay in oil majors’ contract commencement.
Public Investment Bank (PublicInvest) said despite a robust RM5 billion orderbook and healthy industry activity outlook, Dayang’s near-term outlook remains “clouded by persistent delays in work order execution”.
“The disconnect between contract awards and actual job flow poses downside risk to earnings visibility in the coming quarters,” it said in a recent note.
“Although the Petronas Activity Outlook 2025-2027 indicates robust sector activity, we foresee further execution delays following the settlement involving Petros,” it added.
PublicInvest slashed its earnings forecasts by an average of 49.3% to reflect these setbacks. It also downgraded its call to “underperform’ with a lower target price (TP) of RM1.58 from RM1.70 previously.
Regulatory uncertainty
CIMB Securities maintained its “hold” rating and kept its RM1.70 TP for Dayang as it believes its current valuation fairly reflects the challenging operating climate.
Its caution stems from the Petronas-Petros dispute, which risks prolonging regulatory uncertainty, dampening contract rollouts, and ultimately weighing on the company’s earnings momentum.
Kenanga Research maintained its “underperform” rating on the stock but lowered its TP to RM1.44 from RM1.56.
It cited weak upstream activity outlook amid a soft macro backdrop, including tepid crude oil prices and the “Petronas-Petros gridlock”.
Meanwhile, Hong Leong Investment Bank (HLIB) has maintained a “buy” rating on Dayang but with a lower TP of RM2.01 from RM2.67.
“We expect Dayang’s earnings to remain resilient, supported by the seasonal post-monsoon recovery,” it said in a note.
However, it remains cautious on the group’s near-term earnings outlook amid capital expenditure cuts from Petronas but highlighted Dayang’s robust order backlog of RM5.1 billion for multi-year visibility.
Dayang started operations in 1980 with the trading of hardware materials and supply of manpower for the offshore O&G industry.
It took off after diversifying into the provisioning of maintenance services, fabrication operations, hook-up and commissioning, and charter of marine vessels.
Petronas and Sarawak-controlled Petros have been at odds over the role of gas aggregator in the state. The two companies are also embroiled in various legal disputes.
Sarawak is challenging Petronas’s hold over Malaysia’s oil and gas reserves, as stipulated in the Petroleum Development Act 1974, which gives the national O&G company control of the country’s hydrocarbon reserves.
The state holds about 60% of Malaysia’s gas reserves and accounts for 90% of the country’s liquefied natural gas exports.
In May, the federal and Sarawak governments signed a joint declaration on gas distribution in the state. However, the details and new structure of the development of Sarawak’s O&G sector were not disclosed.
Dayang’s shares closed two sen or 1.1% higher at RM1.77, valuing the group at RM2.05 billion. The share price has dropped 14.5% year to date.