Dayang’s earnings visibility supported by RM4b order book

by **Cals** Wed 12 Mar 2014, 12:37

Business & Markets 2014

Written by HwangDBS Vickers Research

Wednesday, 12 March 2014 11:03

Dayang Enterprise Holdings Bhd
(March 11, RM3.79)
Maintain buy with target price of RM4.55: Dayang is now at an inflection point which will herald a new era of strong growth trajectory. As the biggest winner of the RM10 billion Pan-Malaysia hook-up and commissioning (HUC) contracts awarded in mid-2013, Dayang is now the undisputed leader in HUC and topside major maintenance (TMM) services, thanks to its excellent track record.
While timely project execution for its strong order book in excess of RM4 billion will be the focus, Dayang is looking to participate in more offshore contracts, including enhanced oil recovery projects, by expanding its engineering and design expertise.
Dayang’s 25% stake in Perdana Petroleum Bhd is poised to accelerate its growth momentum given the expected high utilisation of Perdana’s 18 vessels in financial year 2014 ending Dec 31 (FY14) and the tightening supply of accommodation vessels. Given that around 85% of its fleet is under long-term charters, Perdana is still on the lookout for more work barges to cater to the rising demand. We estimate that Perdana will contribute 12% and 14% of Dayang’s FY14 and FY15 earnings respectively.
Maintain “buy” with target price of RM4.55 based on 18 times FY15 earnings per share. We continue to like Dayang for its clear earnings visibility, solid balance sheet (4% net gearing) and good execution track record. Its record high order book will keep the company busy for the next five years and transform the oil and gas niche service provider into one of the largest in Malaysia.
It is also one of the rare oil and gas company that offers relatively decent dividend yields despite its aggressive expansion plan last year, underlining its strong fundamentals. — HwangDBS Vickers Research, March 11