DAYANG ENTERPRISE HOLDINGS BHD
(712243-U)
|
Annual Report
2015
18
Message to Our Shareholders
(cont’d)
Market Conditions
The significant plunge in the oil price has no doubt
sent a negative ripple effect throughout the entire
industry. Not long after the downward trend started,
Exploration & Production companies worldwide
began slashing their budgets, leading to new
projects being shelved and the renegotiation of
existing contracts with suppliers and service providers.
Though we are fortunate that our core business
revolves around the Brownfield upstream O&G
industry rather than the more heavily hit Greenfields
sector, we have not been completely shielded
from feeling the adverse effects of these cuts. Our
primary client, Petronas, has recently indicated that
they intend to reduce as much as RM50bil from
their CAPEX and OPEX budgets of RM350bil over the
next four years. Unfortunately, this means that there
will be a deferment in the award of new projects, a
slowdown in work orders and possibly lower rates on
any new contracts that we do win. All of the above
will translate into lower revenues and tighter margins
if we choose not to adapt and evolve.
Acquisition of Perdana Petroleum
In May 2015, upon amassing more than a 33% stake
in offshore supply vessel (OSV) operator, Perdana
Petroleum Berhad, we automatically triggered a
Mandatory General Offer (MGO) for Dayang to
purchase the remainder of Perdana’s shares from
the open market. The takeover consumed RM120mil
of our existing funds and required us to take on
additional bank borrowings of RM680mil. As of
November 2015, Dayang owned a 98.01% controlling
stake in Perdana.
Along with acquiring Perdana’s young fleet of 17
vessels, we also absorbed their net loss of RM101mil
into our books for 2015. This loss can be attributed to
several internal and external factors but rest assured,
we have immediately set out to rectify these issues
in order to align our new subsidiary with the overall
group direction.
First of all, a rightsizing of the Perdana organisation
was carried out which resulted in a reduction of
onshore office based staff from 130 personnel to a
more optimum number of 50. We are also currently
in the midst of refinancing some unhedged USD
loans which caused Perdana to suffer forex losses
last year. Up to USD150mil worth of this loan will be
converted into RM650mil of Islamic bonds via a
Sukuk Murabahah programme. This loan restructuring
process should be completed within the first half
of 2016 and will bring about the dual benefits of
reducing our exposure to the strengthening US dollar
while making the loan Shariah compliant. Another
major contributor to Perdana’s losses last year was
the necessary RM36.5mil down payment write-off for
an Accommodation Work barge (AWB) which was
scheduled for delivery in February 2016. The write-
off was a necessary measure as it would have been
unwise for us to accept delivery of this vessel and
incurring the added operational costs without any
visibility of a firm charter.
Going forward, we intend to pull Perdana out of the
red by lowering its breakeven vessel utilisation rate.
This should be possible considering DESB Marine has
been able to operate at a lower breakeven rate.
At the same time, we aim to improve Perdana’s
average vessel utilisation rate by the end of 2016.
Our options include redeploying Perdana vessels
to Dayang contracts and intensifying our efforts in
marketing both Perdana as well as DESB Marine fleets
to the regional market.
Dayang has continued to forge
ahead in 2015, generating
RM779mil of revenue and a
respectable net profit after tax of
RM170mil.
RM
779mil
revenue 2015
