Dayang Enterprise Holdings Bhd (Jan 19, RM1.90)
Maintain outperform at RM1.90 with fair value of RM2.07: The company announced that it had taken delivery of its new work boat, Dayang Topaz on Wednesday. The company ordered the RM63.7 million work boat from Shin Yang Shipyard in August 2010.
The company also received a letter of award from Brunei Shell Petroleum Co on Monday, extending its contract from March 1 this year to October 2016 for another work boat, Dayang Zamrud. The contract value is about RM85 million over the duration of the contract and was initially awarded in January 2010 for a period of three years.
We are positive on the new delivery as it bumps up the company’s assets. The extension of the contract is another positive, as it indicates that the company has performed well thus far. This will enhance its track record in Brunei and its chances for future contracts from the country. We also highlight that this is an early extension as the initial contract was only supposed to expire in 2013.
We believe the company is gearing up as it expects plenty of opportunities in 2012. Besides taking delivery of the new work boat, it has bought a 11.5% stake in offshore marine vessel player Perdana Petroleum Bhd, which will give it first right of refusal for its assets in the event new contracts are won. On the jobs front, near-term prospects are underpinned by its RM1.3 billion order book, which is likely to last around 2½ years even at a higher revenue burn rate of RM500 million per year. The company is currently bidding for RM300 million worth of projects. It forsees another RM6.5 billion (Pan-Malaysia hook-up and commissioning and Shell HUC contracts) worth of projects to also be tendered out in 2012.
We make no changes to earnings estimates as we understand there is no contract for Dayang Topaz as yet, and there are no changes to the charter rates for Dayang Zamrud.
Risks include: (i) delay in the 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.
We continue to favour Dayang for its direct exposure to the brownfield services industry, and believe its track record will enable it to secure a portion of any contracts that come up for tender. As such, we maintain our “outperform” call on the stock and fair value of RM2.07 per share based on 12 times FY12 earnings per share. — RHB Research, Jan 19
This article appeared in The Edge Financial Daily, January 20, 2012.
Maintain outperform at RM1.90 with fair value of RM2.07: The company announced that it had taken delivery of its new work boat, Dayang Topaz on Wednesday. The company ordered the RM63.7 million work boat from Shin Yang Shipyard in August 2010.
The company also received a letter of award from Brunei Shell Petroleum Co on Monday, extending its contract from March 1 this year to October 2016 for another work boat, Dayang Zamrud. The contract value is about RM85 million over the duration of the contract and was initially awarded in January 2010 for a period of three years.
We are positive on the new delivery as it bumps up the company’s assets. The extension of the contract is another positive, as it indicates that the company has performed well thus far. This will enhance its track record in Brunei and its chances for future contracts from the country. We also highlight that this is an early extension as the initial contract was only supposed to expire in 2013.
We believe the company is gearing up as it expects plenty of opportunities in 2012. Besides taking delivery of the new work boat, it has bought a 11.5% stake in offshore marine vessel player Perdana Petroleum Bhd, which will give it first right of refusal for its assets in the event new contracts are won. On the jobs front, near-term prospects are underpinned by its RM1.3 billion order book, which is likely to last around 2½ years even at a higher revenue burn rate of RM500 million per year. The company is currently bidding for RM300 million worth of projects. It forsees another RM6.5 billion (Pan-Malaysia hook-up and commissioning and Shell HUC contracts) worth of projects to also be tendered out in 2012.
We make no changes to earnings estimates as we understand there is no contract for Dayang Topaz as yet, and there are no changes to the charter rates for Dayang Zamrud.
Risks include: (i) delay in the 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.
We continue to favour Dayang for its direct exposure to the brownfield services industry, and believe its track record will enable it to secure a portion of any contracts that come up for tender. As such, we maintain our “outperform” call on the stock and fair value of RM2.07 per share based on 12 times FY12 earnings per share. — RHB Research, Jan 19
This article appeared in The Edge Financial Daily, January 20, 2012.
