Dayang Enterprise Holdings Bhd
(April 20, RM1.96)
Maintain buy at RM1.93 with target price of RM2.60: We understand that Petronas Carigali is expected to call a tender for its offshore topside maintenance services in the next few months. Early estimates put the contract values for both Peninsular Malaysia (PMO) and Sarawak and Sabah (SKO & SBO) operations at around RM1.2 billion.
Dayang is currently the incumbent for the SKO & SBO while Vastalux holds the PMO operations.
We believe Dayang is well poised to secure the contracts (especially the SKO & SBO) given its long-standing track record as well as ownership of a fleet of workboats which are assets required for the job. Success here would lead to an earnings upgrade in our forecast.
Typically, a maintenance contract value tends to be higher than the original award as additional works apart from those stipulated may need to be carried out.
Similarly, the eventual value of the Sarawak Shell Bhd/Sabah Shell Petroleum Co Ltd (SSB/SSPC) contract could be higher than the RM400 million secured, or 1.25 times of the original value as a rule of thumb, translating into about RM500 million (FY10F contract wins assumption).
Meanwhile, we understand that Borcos may make a provision for previous years' taxation owing from vessels' charter income. However, this is pending discussion with the auditors. We estimate potential downside of 6% in earnings could be made up by stronger contribution from Dayang's oil and gas operations.
Dayang's valuation remains undemanding at FY11F price-to-earnings (PE) and price-to-book-value (PBV) of 8.3 times and 1.6 times, respectively. We view the recent market correction as a good opportunity to accumulate the shares.
Dayang offers strong growth (FY09-FY11F net profit compound annual growth rate of 31.3%) and is a good proxy to oil and gas contract newsflow.
We maintain buy call and RM2.60 per share target price, pegged to 11 times FY11F earnings per share (EPS). - HwangDBS Vickers Research, April 20
This article appeared in The Edge Financial Daily, April 21, 2010.
(April 20, RM1.96)
Maintain buy at RM1.93 with target price of RM2.60: We understand that Petronas Carigali is expected to call a tender for its offshore topside maintenance services in the next few months. Early estimates put the contract values for both Peninsular Malaysia (PMO) and Sarawak and Sabah (SKO & SBO) operations at around RM1.2 billion.
Dayang is currently the incumbent for the SKO & SBO while Vastalux holds the PMO operations.
We believe Dayang is well poised to secure the contracts (especially the SKO & SBO) given its long-standing track record as well as ownership of a fleet of workboats which are assets required for the job. Success here would lead to an earnings upgrade in our forecast.
Typically, a maintenance contract value tends to be higher than the original award as additional works apart from those stipulated may need to be carried out.
Similarly, the eventual value of the Sarawak Shell Bhd/Sabah Shell Petroleum Co Ltd (SSB/SSPC) contract could be higher than the RM400 million secured, or 1.25 times of the original value as a rule of thumb, translating into about RM500 million (FY10F contract wins assumption).
Meanwhile, we understand that Borcos may make a provision for previous years' taxation owing from vessels' charter income. However, this is pending discussion with the auditors. We estimate potential downside of 6% in earnings could be made up by stronger contribution from Dayang's oil and gas operations.
Dayang's valuation remains undemanding at FY11F price-to-earnings (PE) and price-to-book-value (PBV) of 8.3 times and 1.6 times, respectively. We view the recent market correction as a good opportunity to accumulate the shares.
Dayang offers strong growth (FY09-FY11F net profit compound annual growth rate of 31.3%) and is a good proxy to oil and gas contract newsflow.
We maintain buy call and RM2.60 per share target price, pegged to 11 times FY11F earnings per share (EPS). - HwangDBS Vickers Research, April 20
This article appeared in The Edge Financial Daily, April 21, 2010.
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