Daya expected to create more ripples

by **Cals** Mon 23 Dec 2013, 11:17

Daya expected to create more ripples
Business & Markets 2013
Written by CIMB Research
Monday, 23 December 2013 09:52

Daya Materials Bhd
(Dec 20, 38.5 sen)
Not rated at 39 sen: Long under-researched and under-valued when it was operating downstream, Daya has been enjoying a wave of interest following its shift into the upstream subsea services in the North Sea. Watch this stock create more ripples as new vessels are added to the fleet.

We value oil and gas (O&G) small caps at calendar year 2015 price-earnings ratio (CY15 PER) of 15.8 times, which is at a 30% discount to the PER of O&G big caps. Attaching a CY15 PER of 15.8 tonnes to consensus financial year 2015 (FY15) net profit and assuming an enlarged share base post-private placement, we think the stock could fetch 56 sen, resulting in a 44% upside to the current share price.

What a difference five years make. When we first met Daya’s management in 2008, the company was primarily involved in the downstream businesses of technical services and specialised polymer. Today, the company is one of the world’s fast emerging subsea companies with vessels deployed in the North Sea, the first for a Malaysian company.

FY13 has been an exciting year for Daya. Following the company’s venture into subsea services this year, the order book now stands at a record RM1.5 billion. Its three vessels — Siem Daya 1, Siem Daya 2 and Bourbon Evolution 803 — are busy. We will be on the lookout for more vessels as Daya caters to the rising demand in the North Sea. The company has also made an investment in Reach Energy, which is set to become Malaysia’s fourth special purpose acquisition company (SPAC).

Based on consensus estimates, Daya’s net profit is set to scale new highs of RM29 million (+44% year-on-year [y-o-y]) in FY13, RM43 million (+47% y-o-y) in FY14 and RM49 million (+15% y-o-y) in FY15. Daya’s streak of record net profits translates into a three-year earnings per share compound annual growth rate (EPS CAGR) of 29%, higher than the sector average of 22%.

Daya offers a seven-year earnings visibility, a healthy balance sheet and a record RM1.5 billion order book that drives the company’s three-year EPS CAGR of 29%. Based on consensus estimates, Daya is trading at 13 times FY14 and 11 times FY15 PER. Our O&G portfolio is trading at PER averages of 20 times for CY14 and 17 times for CY15. — CIMB Research, Dec 19

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