Dayang’s 1Q earnings reflect healthy activity level

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Dayang Enterprise Holdings Bhd
(May 7, RM2.71)

Maintain buy with unchanged target price (TP) of RM3.82: Dayang Enterprise Holdings Bhd is slated to announce earnings for the first quarter ended March (1QFY15) by end-May. We anticipate that 1QFY15 earnings will outpace what was achieved in 1QFY14. With the robust activity level achieved in the first three months of this year, coupled with the newly secured modification works from Petronas Carigali Sdn Bhd in December 2014 worth approximately RM280 million, we anticipate that Dayang will post earnings in excess of RM35 million for 1QFY15. In addition, we anticipate that an additional earnings boost from its associate company Perdana Petroleum Bhd will contribute to the commendable results. 

Activity level in 1QFY15 remained robust with the projects from Sarawak Shell Bhd/Sabah Shell Petroleum Co Ltd, JX Nippon Oil & Gas Exploration (Malaysia) Ltd and Petronas Carigali recording commendable progress. 

However, the hook-up and commissioning (HUC) and topside maintenance works from Murphy Sarawak Oil Co Ltd experienced a slight decline in activity level due to rescheduling and reorganisation of work activities. 

Dayang currently has an order book of approximately RM4 billion, largely consisting of HUC and topside maintenance job orders. Realising this, the company has since expanded its focus into the other segments of the oil and gas (O&G) value chain, such as major modification works (involving major design and engineering capabilities) and facilities improvement works. The company currently has a tender book of approximately RM800 million, focusing on the aforementioned sub-segments of the O&G value chain. 

We are maintaining our “buy” recommendation on Dayang with an unchanged TP of RM3.82 per share, based on an FY15 price-earnings ratio of 16 times on FY15 earnings per share of 23.9 sen. — MIDF Research, May 7

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This article first appeared in The Edge Financial Daily, on May 8, 2015.