Stock Name: DAYANG
Company Name: DAYANG ENTERPRISE HOLDINGS BHD
Research House: HWANGDBS
Dayang Enterprise Holdings Bhd
(April 19, RM1.99)
Maintain buy at RM2.02 with target price RM2.70: After securing a RM802 million topside maintenance contract in February 2011, Dayang currently has its hands full with a RM1.5 billion outstanding order book (six times book-to-bill). Execution will be the key priority for the company. It will take delivery of its fifth work boat, Dayang Topaz (cost RM64 million), by end-2011 and second supply boat, Dayang Cempaka (cost RM9 million), by mid-2011, which will be used for the RM802 million contract. We understand that there are potential maintenance and hook-up and commissioning jobs worth RM400 million to RM500 million to be awarded this year. However, given Dayang's record order book, it will focus on execution and likely target new high-margin jobs.
Dayang will now have a RM320 million cash pile after the Borcos Shipping Sdn Bhd disposal, which was completed yesterday. This is likely to prompt M&A, including vessel and brownfield services companies, although we understand that there is nothing specific at the moment. Sequentially, we lower our FY11/13F earnings by 17% to 19% to remove Borcos contributions from our forecast. Dayang's margins have consistently outperformed the sector and its closest competitors ' Petra Energy Bhd and Vastalux Energy Bhd. In FY10, Dayang's operating margin was 33.4% against Petra Energy's 3.2%. Vastalux recorded an operating loss that year.
We maintain our RM2.70 target price after rolling forward our valuation base to FY12F, pegged to 15.5 times price-earnings ratio. We project Dayang to register two-year earnings compound annual growth rate of 19%, underpinned by its record order book and superior margins. Dayang is currently trading at attractive ex-cash (after Borcos disposal) FY11F PER of 10 times against the sector's 17 times. ' HwangDBS Vickers Research, April 19
This article appeared in The Edge Financial Daily, April 20, 2011.
Company Name: DAYANG ENTERPRISE HOLDINGS BHD
Research House: HWANGDBS
Dayang Enterprise Holdings Bhd
(April 19, RM1.99)
Maintain buy at RM2.02 with target price RM2.70: After securing a RM802 million topside maintenance contract in February 2011, Dayang currently has its hands full with a RM1.5 billion outstanding order book (six times book-to-bill). Execution will be the key priority for the company. It will take delivery of its fifth work boat, Dayang Topaz (cost RM64 million), by end-2011 and second supply boat, Dayang Cempaka (cost RM9 million), by mid-2011, which will be used for the RM802 million contract. We understand that there are potential maintenance and hook-up and commissioning jobs worth RM400 million to RM500 million to be awarded this year. However, given Dayang's record order book, it will focus on execution and likely target new high-margin jobs.
Dayang will now have a RM320 million cash pile after the Borcos Shipping Sdn Bhd disposal, which was completed yesterday. This is likely to prompt M&A, including vessel and brownfield services companies, although we understand that there is nothing specific at the moment. Sequentially, we lower our FY11/13F earnings by 17% to 19% to remove Borcos contributions from our forecast. Dayang's margins have consistently outperformed the sector and its closest competitors ' Petra Energy Bhd and Vastalux Energy Bhd. In FY10, Dayang's operating margin was 33.4% against Petra Energy's 3.2%. Vastalux recorded an operating loss that year.
We maintain our RM2.70 target price after rolling forward our valuation base to FY12F, pegged to 15.5 times price-earnings ratio. We project Dayang to register two-year earnings compound annual growth rate of 19%, underpinned by its record order book and superior margins. Dayang is currently trading at attractive ex-cash (after Borcos disposal) FY11F PER of 10 times against the sector's 17 times. ' HwangDBS Vickers Research, April 19
This article appeared in The Edge Financial Daily, April 20, 2011.
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