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PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 24 Jun 2021, 9:56 AM

 

Dayang Enterprise Holdings - New Contract Reaffirms Outlook

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Dayang has been awarded a contract by Sarawak Shell and Sabah Shell Petroleum Company Limited for the Provision of Topside Major Maintenance Services under Package A. While no contract value was disclosed, this contract is viable for a two year period, up to August 2023. This represents the Group’s third contract for FY21, maintaining its balance orderbook of c. RM2.5bn with earnings visibility of more than three years. The slew of new contracts awarded reaffirms our view that the oil and gas sector is en route for a gradual recovery after a painful 2020, with the Group maintaining the utilization of its vessels. We maintain our FY21-23 forecast, having assumed this in our replenishment assumptions. On the Group’s upcoming 1QFY21 results, we foresee that it may still post weak earnings given the monsoon season. That said, earnings are expected to pick up from 2Q onwards in tandem with higher activity levels post monsoon season. Our Outperform rating on Dayang is affirmed with an unchanged TP of RM1.66.

  • The contract is for provision of Topside Major Maintenance Services for Sarawak Shell Berhad and Sabah Shell Petroleum Company Limited. Contract lifespan is 28 months, starting 29 April 2021 until 19 August 2023. While no value has been provided as it is based on work orders issued by the client, we estimate this contract will contribute between RM40m and RM50m to the Group’s top line annually.
  • Replenishing orderbook. This represents the Group’s third contract for FY21, maintaining its balance orderbook of c. RM2.5bn with earnings visibility of more than three years. We believe oil and gas activities will be more significant this year as oil majors are currently expediting some of the works postponed in 2020 as oil prices remain stable above USD60/bbl.
  • New contract reaffirms outlook. We are positive over this contract as it shows that overall work activities are continuing, and with the Group being able to maintain its vessel utilization of >60% currently. We make no change to earnings forecast as we have assumed this under our replenishment assumption of ~RM200m/year. While upcoming results are likely to still be affected by bad weather, it is expected to pick up in the following quarters given higher activity levels post monsoon season. This is in tandem with progressive recovery in sector dynamics for 2021.

Source: PublicInvest Research - 11 May 2021

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