Research houses bullish on Dayang's prospects

Posted on 10 December 2013 - 05:39am

Rupinder Singh
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PETALING JAYA (Dec 10, 2013): Dayang Enterprise Holdings Bhd is poised for further growth with its business expansion plans that include winning a five-year hook-up and commissioning (HUCC) and major topside maintenance (TM) starting this year.

Last month, Petroliam Nasional Bhd (Petronas) awarded a 13-package, five-year offshore HUCC contract, known as the Pan Malaysian Cluster, worth RM8 billion to RM10 billion to six local service providers, including Dayang.

PublicInvest Research is bullish on Dayang's expansion strategies which include strengthening its presence in the oil and gas (O&G) sector by sustaining a strong asset base which currently comprises nine vessels.

It noted the acquisition of one offshore accommodation work-boat that is expected to be delivered by the fourth quarter of 2014 as part of its fleet expansion plan to provide marine support to offshore O&G facilities, as well as the charter of marine vessels including five work barges and one work-boat from its 26.1%-owned associate Perdana Petroleum Bhd.

It reaffirmed its "outperform" recommendation on Dayang at RM5.35, with a target price of RM6.02, pegged to a 14 times multiple for the financial year ending Dec 31, 2014 earnings per share of 43 sen.
RHB Research Institute Sdn Bhd, too, is positive on Dayang's earnings outlook and chose the stock as its top pick given its expertise in HUCC and TM.

It is also upbeat on Dayang's proposed 1-for-2 bonus issue of up to 275 million shares as it signals the management's confidence.

RHB Research is maintaining a "buy" call on Dayang, with a target price of RM6.72, anticipating margin expansion from new HUCC and TM work orders in the second half of this year as well more associate contributions from Perdana Petroleum.

"We believe its current price has not fully captured its outstanding RM5 billion orderbook including a milestone RM4.2 billion job secured for the Pan Malaysia Cluster in May 2013, which provides earnings visibility through 2018," it said in a note to clients yesterday.

RHB Research also sees potential upside for Dayang's marine division. Its sources suggested that riser platforms and liquefied natural gas (LNG) trains for the Petronas-operated Block SK 316 gas field development off Malaysia could be commissioned as early as 2015 for the Bintulu LNG complex.

"We believe Dayang has already made plans to capture such opportunities – it has a strategic charter of five to six marine vessels from Perdana Petroleum for the Pan Malaysia HUCC works. An additional two vessels (to be delivered in December 2013 and November 2014 respectively) will bring its own fleet to a total of nine vessels," RHB Research added.