Highlights

Dayang Enterprise Holdings - Building Up Orderbook

Date: 02/05/2019

Source  :  PUBLIC BANK
Stock  :  DAYANG       Price Target  :  1.25      |      Price Call  :  HOLD
        Last Price  :  1.87      |      Upside/Downside  :  -0.62 (33.16%)
 


Dayang announced that it has clinched a new maintenance, construction and modification (PM MCM) contract from SEA Hibiscus Sdn Bhd for a period over five years starting 2nd November 2018. There is no fixed value and specific work detail provided in this contract as usual, as it will be based on work orders issued by the project owner from time to time. We welcome this news as it helps Dayang to further improve its earnings visibility over the next five years, though we are not surprised. Our forecasts are left unchanged, having accounted for this in our annual orderbook replenishment target for FY19. We maintain our Neutral call on Dayang with an unchanged TP of RM1.25, based on 8x PE multiple to FY20F EPS of 15.6 sen.

  • The contract’s lifespan is for five years from 2 November 2018 to 16 July 2023, with an option to extend for another 1 year. There is no specific value for this contract as it will be based on work orders issued by the project owner throughout the period, which shall include any other work and services related to the scope of works in this contract at a fixed schedule of rates.
  • No surprise, earnings forecast unchanged. While positive on this contract as it helps to improve Dayang’s future earnings visibility, we are not surprised over this development given its strong position as a brownfield services specialist, having good track record in handling these similar contract types since 2013. We are leaving our forecasts unchanged, having accounted for this in our annual orderbook replenishment target. We estimate the value for this PM MCM contract could be worth at least c.RM300m – RM500m, with a pre-tax profit margin of high single digits. Dayang’s balance orderbook in hand remains solid at >RM3bn.
  • 1QFY19 results preview. Dayang’s 4QFY18 results had caught us by surprise despite the period being the monsoon season, the robust numbers coming on the back of healthy lump-sum work orders on its topside maintenance which consequently contributed to higher profit margins. 1QFY19 is also a seasonally weak quarter, hence we expect QoQ growth would be negative, with activities likely to pick-up in 2Q and 3Q.

Source: PublicInvest Research - 2 May 2019

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