Dayang's careful planning pays off


Dayang Enterprise Holdings Bhd

By HwangDBS Vickers Research

Buy

Target price: RM4.55

SINCE securing the mega contracts in mid-2013, Dayang has been working tirelessly in preparation for the execution of the work orders. The group has undertaken aggressive hiring activities to increase its manpower.

Dayang’s capital expenditure of RM150mil in the financial year 2013 is also the highest ever recorded since its inception, compared with RM40mil in 2012.

For instance, it has expanded capacity at yards/warehouses in Labuan and Kemaman, in anticipation of busy schedule in 2014 when clients are expected to issue more work orders.

“We understand that Dayang has been busy looking at ways to further improve its operational efficiency. While margin compression is inevitable in view of the rising cost, Dayang is likely to maintain good profitability vis-à-vis its peers, due mainly to its lean operation,” HwangDBS said.

Continuous fleet expansion to support increasing jobs has always been at the forefront of Dayang’s business development.

It has placed a work boat order with Shin Yang shipyard in September 2013 which will be delivered by the fourth quarter of this year.

At this juncture, Dayang owns a fleet of six work boats, making it one of the largest accommodation vessel owner/operator in Malaysia.

The careful planning of adding one new vessel every year bodes well for the group’s operations as it strives to maximise vessel utilisation to ensure highest profitability.

Pestech International Bhd

By Kenanga Research

Outperform

Target price: RM4.93

PESTECH announced that its wholly-owned unit Pestech (Cambodia) Ltd had executed an agreement with Alex Corp Co Ltd for the design, engineering, manufacturing, installation, testing and commissioning of the 230kV West Phnom Penh – Sihanoukville 198km Transmission Line and 230/115/22kV Substation Extension project.

The project, valued at US$86.07mil (RM280mil), is expected to start within three months with a construction period of 32 months.

“We are very positive on its ability to secure more contracts.

“This is the second contract win this year after the RM85mil Mambong and Entinggan 275kV substation extension project in mid-January,” said Kenanga Research.

“This brings year-to-date total value wins to RM365mil which is higher than our financial year 2014 new order assumption of RM350mil, which is impressive given that we are only three months into the financial year 2014,” it said.

Its current orderbook is currently slightly more than RM700mil from RM424mil in January 2014.

Profit margin for this project is expected at 20% at operating level, which is the norm for such projects.

The RM700mil orderbook should provide at least two years of firm earnings visibility.

“With its current tenderbook of RM1.33bil, we believe our new order assumption of RM350mil to RM400mil between 2014 and 2015 is not overly optimistic, said Kenanga Research.

BERJAYA AUTO BHD

By RHB Research

Buy

Target price: RM2.20

BERJAYA Auto’s earnings for its third quarter ended Jan 31 rose 10.8% quarter-on-quarter and 437.7% year-on-year to RM30.6mil, slightly ahead of our and consensus estimates.

Its nine-month net profit of RM84.3mil reached 77.5% and 80.7% of RHB Research’s and consensus estimates respectively.

It is worth noting that during the quarter, the company posted a RM7mil expense relating to an employee stock option scheme, which led to a slight dip in third-quarter earnings before interest and tax margin to 11.5% from 12.1% in the preceding quarter. No dividend was declared for the quarter.

The group’s nine-month revenue surged 60.6% on a 26% jump in domestic Mazda sales volume, reflecting a higher average selling price arising from a change in its sales mix.

“The market’s response to the new Mazda range has been positive. While we expect stiff competition in the marketplace going forward, we remain positive on Berjaya Auto’s outlook in view of, among other things, its strong new model pipeline and expansion of its completely knocked-down operation with the imminent commissioning of its Inokom production facility,” it said.

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