RHB Research initiates coverage on Daya, Buy call

KUALA LUMPUR: RHB Research has initiated coverage on Daya Materials with a Buy call and a fair value of 48 sen as the research house favours the group’s strong earnings growth and potential ownership of vessels to capture higher recurring earnings.
In a note on Thursday, it said despite a shift in focus to the O&G segment in 2007 from polymers and technical services, Daya has yet to receive the attention it deserves from the investment community.
“We believe this is due to the lack of a solid domestic track record. Locally, Daya has only been involved in the Tapis enhanced oil recovery (EOR) and Telok Gas Development projects,” it said.
RHB said a major milestone for Daya was when its subsidiary, Daya Offshore Construction (DOC), landed two long-term North Sea contracts from Technip totaling up to RM610mil in August this year.
“Management indicates that Daya intends to acquire stakes in the Siem Daya 1 (SD1) and Siem Daya 2 (SD2) offshore subsea construction vessels (OSCVs).
“If finalised, we are positive on the deal despite the group having to take on higher debt, as – assuming a 51% stake in a US$120mil vessel and 75% debt to total asset – we estimate Daya’s share of net profit at RM4.9mil per annum per vessel,” it said.
RHB said it expects expect Daya to achieve 65%, 27% and 6.8% earnings growth for financial years 2013, 2014 and 2015, mainly driven by its North Sea charter contract and higher orderbook recognition from offshore services.