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This article first appeared in The Edge Financial Daily on September 3, 2018

Dayang Enterprise Holdings Bhd
(Aug 30, 75 sen)
Reiterate outperform with an unchanged target price (TP) of 98 sen:
Dayang Enterprise Holdings Bhd last week announced it had secured a provision of Pan Malaysia maintenance, construction, and modification (PM-MCM) contract win from JX Nippon Oil & Gas Exploration (Malaysia) Ltd, for five years up to 2023. While no value was mentioned, we guesstimate a value of about RM100 million to RM200 million, bringing year-to-date (YTD) contract wins to about RM1.2 billion. While we are positive about the contract win, we make no changes to our forecasts as they were within our FY18 replenishment assumption of RM1.5 billion.

While no firm contract value was mentioned, as the actual value is dependent on work orders being issued, we estimate the contract value to be roughly about RM100 million to RM200 million. Overall, we are positive about the contract win, as we reckon this is an extension to Nippon’s prior topside major maintenance contract awarded to Dayang back in 2013, thus indicating its commendable job execution and ability to retain clients, while also providing added job flows and earnings visibility.

More contract wins are still expected of Dayang for remainder of FY18. Likewise, this contract brings Dayang’s YTD wins to a guesstimated total value of about RM1.2 billion, against our financial year 2018 (FY18) order book replenishment assumption of RM1.5 billion, implying another one to two more contract wins for the remainder of the year. Given that the current landscape is geared more towards cost optimisation, we believe earnings before interest and tax margin for these recent wins would be within the range of 10%-20%, as opposed to 20%-25% previously. All in, we make no changes to our FY18 and FY19 estimates.

We reiterate “outperform” call with an unchanged sum-of-parts TP of 98 sen, with catalysts stemming from further contract wins, earnings delivery, and an improved outlook for Perdana. — Kenanga Research, Aug 30

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