Dayang Enterprise Holdings Bhd (Nov 23, RM1.80)
Maintain market perform at RM1.81 with revised fair value of RM1.73 (from RM1.55): Core net profit for 9MFY11 of RM69.1 million was above expectations, accounting for 89% of our full-year estimate (RM77.6 million) and 82.7% of consensus estimate of RM83.6 million. Variance to our estimate was mainly due to: (i) better than expected earnings before interest and tax (Ebit) margins especially from the marine charter division; and (ii) the lower than expected interest costs for the year.
While sequential revenue increased minimally (+2.5%), better Ebit margins for both the topside maintenance (+29%) and marine charter divisions (+32.3) led to a stronger 3QFY11 net profit of RM30.3 million (+24.8%).
While there was no mention that the company had taken up the 10% private placement stake from Perdana Petroleum Bhd, we believe it is likely to be Dayang. As mentioned previously (in our sector report dated Oct 5), we believe the main driver for the tie-up is Perdana Petroleum’s accommodation vessel fleet which fits in with Dayang’s brownfield work (topside maintenance and hook-up and commissioning). Moreover, the company is looking to tender for up to RM5 billion jobs in FY12. Hence, quick access to assets is imperative.
We are: (i) increasing our marine charter Ebit margin to 55% (from 23%) as we were previously too conservative; and (ii) decreasing our FY11/FY12 interest costs by 30% and 47% to be in line with the company’s current interest cost. The changes result in a 9.5%, 11.1% and 5.5% change in our FY11 to FY13 net profit estimates. We note that our full-year estimate of RM85 million suggests softer 4QFY11 results. But in our view this should be expected given the monsoon season.
Risks include: (i) delay in start-up of scheduled contracts; (ii) lower than expected contract margins; and (iii) a weaker than expected global economic recovery that could lead to less urgency in new contracts.
Our change in net profit estimates pushes our fair value for the stock to RM1.73 (from RM1.55 previously), based on 10 times FY12 earnings per share. Dayang is one of the most direct beneficiaries in the push to rejuvenate mature assets in Malaysia. However, a protracted slowdown in the economy could cap the sentiment towards oil and gas stocks, especially small-caps like Dayang. As such, we maintain our “market perform” call on the stock. — RHB Research, Nov 23
This article appeared in The Edge Financial Daily, November 24, 2011.
Maintain market perform at RM1.81 with revised fair value of RM1.73 (from RM1.55): Core net profit for 9MFY11 of RM69.1 million was above expectations, accounting for 89% of our full-year estimate (RM77.6 million) and 82.7% of consensus estimate of RM83.6 million. Variance to our estimate was mainly due to: (i) better than expected earnings before interest and tax (Ebit) margins especially from the marine charter division; and (ii) the lower than expected interest costs for the year.
While sequential revenue increased minimally (+2.5%), better Ebit margins for both the topside maintenance (+29%) and marine charter divisions (+32.3) led to a stronger 3QFY11 net profit of RM30.3 million (+24.8%).
While there was no mention that the company had taken up the 10% private placement stake from Perdana Petroleum Bhd, we believe it is likely to be Dayang. As mentioned previously (in our sector report dated Oct 5), we believe the main driver for the tie-up is Perdana Petroleum’s accommodation vessel fleet which fits in with Dayang’s brownfield work (topside maintenance and hook-up and commissioning). Moreover, the company is looking to tender for up to RM5 billion jobs in FY12. Hence, quick access to assets is imperative.
We are: (i) increasing our marine charter Ebit margin to 55% (from 23%) as we were previously too conservative; and (ii) decreasing our FY11/FY12 interest costs by 30% and 47% to be in line with the company’s current interest cost. The changes result in a 9.5%, 11.1% and 5.5% change in our FY11 to FY13 net profit estimates. We note that our full-year estimate of RM85 million suggests softer 4QFY11 results. But in our view this should be expected given the monsoon season.
Risks include: (i) delay in start-up of scheduled contracts; (ii) lower than expected contract margins; and (iii) a weaker than expected global economic recovery that could lead to less urgency in new contracts.
Our change in net profit estimates pushes our fair value for the stock to RM1.73 (from RM1.55 previously), based on 10 times FY12 earnings per share. Dayang is one of the most direct beneficiaries in the push to rejuvenate mature assets in Malaysia. However, a protracted slowdown in the economy could cap the sentiment towards oil and gas stocks, especially small-caps like Dayang. As such, we maintain our “market perform” call on the stock. — RHB Research, Nov 23
This article appeared in The Edge Financial Daily, November 24, 2011.
