Dayang Enterprise earnings likely to rise in second half of 2013

Dayang Enterprise earnings likely to rise in second half of 2013
Business & Markets 2013
Written by Bernama
Tuesday, 27 August 2013 12:48

KUALA LUMPUR (Aug 27): DAYANG ENTERPRISE HOLDINGS BHD []'s earnings will likely be boosted in the second half of 2013 by new contracts secured earlier this year, said RHB Research.

The research house said Dayang Enterprise's first half results were in line with consensus full-year estimates.

"We believe the stock should be re-rated higher, given its clear earnings visibility for the next five years, coupled with its solid execution track record," it said in a note.

RHB Research added that another re-rating catalyst would be when its market capitalisation breached the US$1 billion level, as Dayang Enterprise would then appear on the radar of more institutional investors.

Dayang Enterprise posted a 21 per cent increase in its pre-tax profit to RM69.9 million in the first half of its financial year ending June 30, 2013 versus RM57.6 million in the same period last year.

The higher pre-tax profit during the period was due to higher profit margin contribution from topside maintenance services.
Its revenue went up by five per cent to RM199.5 million from RM189.5 million, mainly due to higher fleet utilisation and higher revenue from topside maintenance services.

"We believe that Dayang Enterprise's net margins will likely slide, as it will need to strengthen its manpower and charter new vessels to cater for the new jobs secured," said RHB Research.

Mobilisation costs, which are incurred at the initial stage of a new project, could also contribute to lower margins although it would be a one-off cost, it added.

Dayang Enterprise declared a first interim dividend of five sen per share.

"We retain our net dividend forecast of 15 sen per share, based on a 50 per cent net payout ratio," said RHB Research. RHB Research maintained a "Buy" call for the stock with a target price of RM6.50.