This article first appeared in The Edge Financial Daily on January 26, 2018

Daya Materials Bhd
(Jan 25, nine sen)
Retain neutral call with a higher target price (TP) of nine sen: Daya Materials Bhd announced the securing of yet another contract, a three-year RM13 million contract for the comprehensive maintenance of the air-conditioning and mechanical ventilation systems at the Petronas Twin Towers, Masjid Asy-Syakirin, Kompleks Dayabumi and Petrosains. Works will be undertaken by 50.1%-owned Daya OCI Sdn Bhd. Contributions will be small, but this is a positive step towards turning around its fortunes post-exit of the upstream oil and gas business. Our “neutral” call on Daya is retained, but we lift our TP to nine sen as we tag a higher 10 times multiple of its current financial year 2018 earnings per share of 0.9 sen. We see the higher multiple justifiable given its continuous securing of contracts in recent months, solidifying its medium- to longer-term prospects.

The contract is for three years, effective Jan 1, 2018 to Dec 31, 2020, valued at RM13 million. There is a renewal option for a further three years upon expiry of the first contract period. The works are awarded by KLCC Urusharta Sdn Bhd, a wholly-owned subsidiary of KLCC Property Holdings Bhd.

In November last year, Daya secured an RM124.4 million 14-month contract through 51%-owned Daya CMT Sdn Bhd for the proposed expansion of a manufacturing facility in Penang. In December, it secured an RM67 million five-year contract (with a one-year optional extension) through 67%-owned Daya Secadyme Sdn Bhd for the provision of integrated production chemical supply and chemical services for SK Oil. Early this year, Daya Secadyme secured yet another contract for the supply and delivery of specialty chemicals, though no values were mentioned. The contract is for a three-year period (with an optional extension for another two years), awarded by Petronas. The group’s current order book now stands close to RM800 million with these recent awards, with about 20% of it alone coming in the last three months. Its current tender book is in excess of RM2 billion, with relatively fair chances of some translating into its order book over the medium term. — PublicInvest Research, Jan 25