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PublicInvest Research

Author: PublicInvest   |   Latest post: Mon, 25 Mar 2019, 10:47 AM

 

Dayang Enterprise Holdings - Eyeing Melaka

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Dayang Enterprise (Dayang) announced that it has entered into a Memorandum of Understanding (MOU) with PKNM Energy Sdn Bhd (PKNME) and Main Velocity Sdn Bhd (MVSB) for the purpose of discovering oil and gas opportunities in Melaka. The MoU is valid for six months starting 12 March 2019. With no material details provided, we are unable to ascertain the impact though we are positive on this as it helps expand the Group’s technical capabilities, geographical coverage as well as client portfolio. Having said that, we still believe Dayang’s focus will still be on its bread and butter businesses, underpinned by a solid orderbook in hand of RM3bn and tenderbook of around RM20bn. Share price has now more than doubled from the RM0.80 level post-result announcement and is up 141.4% since our recommendation upgrade, which we believe is mainly due to the robust performance in its 4QFY18 financial results and in anticipation that the trend will continue. We err on the side of conservatism however, though we keep forecasts unchanged. Our TP is raised to RM1.25 (RM1.16 previously) on a rolled-over 8x multiple to FY20 EPS, while call is lowered to Neutral given the lack of upsides.

  • The MoU involves Dayang, PKNME and MVSB. PKNME is a fully owned subsidiary of Perbadanan Kemajuan Negeri Melaka, a leading development state agency in Melaka particularly in industrial, property and entrepreneurial segments, and intends to be involved in the business of oil and gas, asset management, engineering and energy. MVSB meanwhile, is involved in pipeline installation, inspection, pre-commissioning, construction, maintenance in petrochemical industrial, fabrication, bolt and leak testing, vessels supply manpower supply as well as offshore catering services.
  • Rationale. The rationale of the MoU is to establish a cooperation and collaboration in exploring, securing and operating any projects in Melaka relating to oil and gas, energy, engineering and civil works, construction and development. The MoU agrees on the commitment to collaborate whereny PKNME will assist in procuring local resources involved with the related projects and supervise and monitor the planning and progress of the proposal to ensure its materialization while Dayang shall be fully responsible for the business strategy and to obtain the approvals, licenses, permits and other matters pertaining to the related projects. For MVSB, it shall undertake and be responsible as the business development strategist, business coordinator and for the deliverables of the related projects.

Source: PublicInvest Research - 14 Mar 2019

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