PublicInvest positive on Dayang's Pan Malaysia contracts, earnings outlook remains cloudy


KUALA LUMPUR: PublicInvest Research is positive on Dayang Enterprise Holdings Bhd's two new Pan Malaysia contracts, which evidences Dayang’s strong position as a brownfield services specialist and ensure its earnings visibility for the next five years.

The contract, one each from Kebabangan Petroleum Operating Company Sdn Bhd and Repsol Oil & Gas Malaysia Ltd are for the the Pan Malaysia Maintenance, Construction and Modification project, lasting a period of five years.

"There is no specific value for this contract as it will be based on work orders issued by the project owner throughout the period, which shall include any other work and services related to the scope of works in this contract at a fixed schedule of rates," said PublicInvest.

The research house is leaving its forecasts unchanged, as it has broadly accounted for these projects in its annual orderbook replenishment targets. 

PublicInvest believes Dayang's earnings outlook this year could be cloudy due to the slower-than-expected recovery of Perdana Petroleum.  

"As such, our Neutral call on the stock is maintained, with an unchanged target price of RM0.70, based on a 10x multiple to FY19F EPS of 7.0sen."

PublicInvest believes there may be another two to three contracts to come from the 10 Pan Malaysia MCM-related tenders for packages it has participated in.

"It now has 3 in hand, inclusive of these new contracts. We expect there will be another 2-3 contracts to come given Dayang’s strong position as a brownfield services specialist, having good track record in handling similar contracts back in 2013," it said.

The research house estimates the value for all the contracts under Dayang could be worth RM1.5bil to RM1.8bil with a conservative profit margin of mid to high single digits.

Dayang’s balance orderbook in hand remains solid at about RM3.3bil, it said.
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