Dayang's revenue visibility grows from Shell contract win

KUALA LUMPUR: Dayang Enterprise Holdings Bhd's recent contract win from Sarawak Shell and Sabah Shell is a boost to its revenue visibility while showcasing its job delivery capabilities, says Kenanga Research.

The research house, which has an "outperform" recommendation on the stock, said the contract has a longer duration than its previous contract awarded by Shell, which implies that the client is relatively satisfied with its job capabilities.

Kenanga guesstimates the contract to be worth about RM100mil, which brings the group's order book to about RM2.5bil and provides revenue visibility for the next two to three years.

"We expect the contract to fetch mid-teens operating margins," it added.

Kenanga has an unchanged target price of RM1.80 on the stock, pegged to 1.1x price-book value, which is close to historical mean valuations.

"Post results, we make no changes to our FY20-21E earnings, as the contract win is still within our FY21E order-book replenishment assumption of RM300m (versus YTD contract wins of

"Our OP call is premised on the group’s potential for gradual recovery in FY21-22, anticipating the return of job flows from the low suffered in 2020," said Kenanga.
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