KUALA LUMPUR (June 20): Hong Leong Investment Bank (HLIB) Research has upgraded Dayang Enterprise Holdings Bhd with a higher target price (TP) of RM1.21 (from 88 sen) on the back of stronger financial results and a potential new contract.
In a note today, HLIB Research said it was upgrading the counter to buy with an upgraded target price of RM1.21 on an ex-rights basis and RM1.26 on a cum right basis.
The research house said it was doing so due to higher valuations for Dayang's offshore support vessel segment's higher 0.6 times price to book value (PBV) (previously 0.3 times) and its topside maintenance service segment's 10 times financial year 2019 (FY19) price earnings ratio (PER) (previously nine times).
"We believe both segments warrant higher multiple in view of robust workflow in the near-medium term. The announcement of restructuring also eliminates investors' concerns over Perdana Petroleum Bhd's going concern issue amidst strengthening its balance sheet," said HLIB Research.
The research house also said it was upgrading the stock on the basis of a potential hooking up and commissioning (IHUC) contract win from Petronas Carigali Sdn Bhd as well as stronger quarterly results in terms of year-on-year and quarter-on-quarter growth.
It noted that the group's share price has fell 38% from its peak, suggesting the market has priced in the negative impact from a seasonally weak first quarter of the financial year 2019 (1QFY19) result and potential earnings dilution from the ongoing proposed restructuring, which involves a private placement and rights issue of up to 10% of the group's shares.
At 9:50am, shares in Dayang rose 5.61% or six sen to RM1.13 — with 16.01 million shares traded — giving it a market capitalisation of RM1.01 billion.