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HLBank Research Highlights

Author: HLInvest   |   Latest post: Fri, 27 Nov 2020, 11:01 AM

 

Dayang Enterprise Holdings - Topaz Tragedy

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Dayang Topaz (80.4m maintenance/ work vessel) has sunk in offshore Miri after running into trouble on Tuesday morning. 184 people have been rescued while 2 were unfortunately found dead. We understand that Topaz caters to about c.20% of maintenance work done by Dayang. The vessel is not in a state of total loss and it is repairable. Damages to the vessel are also expected to be fully insured. We believe that the aforesaid instance is expected to have minimal impact towards the operations of Dayang as it will deploy either Dayang Zamrud or an unutilised Perdana vessel to replace Topaz within the next few days. Maintain HOLD call with unchanged TP of RM.87 based on 9x FY21 EPS.

NEWSBREAK

Dayang Topaz (80.4m maintenance/work vessel), a ship with 186 crew members on board has sunk in the South China Sea offshore of Miri in Northern Sarawak after running into trouble on Tuesday morning. A massive search and rescue operation as launched after distress signals from the Dayang Topaz were picked up. Malays ian Maritime Enforcement Agency has confirmed that, so far, 184 people have been rescued while 2 were unfortunately found dead.

HLIB’s VIEW

Ship has sunk. Dayang Topaz, which caters to about c.20% of maintenance work done by Dayang has sunk. We understand that the ship did not capsize, it sunk and there were only damages to the crane and related items. Topaz was already due for dry docking soon and the ship will be sent for repair along with its maintenance services. The vessel should be ready for commissioning again after 1-2 months. In the meantime, Dayang would either deploy Zamrud or one of Perdana’s unutilised vessels to continue its work for Petronas Carigali.

Fully Insured. The Damages to the Vessel Will be Fully Insured.

Outlook. We believe that there will be minimal impact towards the operations of Dayang as the management already has a spare unutilised vessel in place to fill in for Topaz. On the macro front, the resurgence of Covid-19 cases and weak oil prices are also expected to affect Dayang negatively as we believe that Petronas will continue to underspend on its capex and opex.

Forecasts. No changes to our forecast as we expect the unfortunate incident to have minimal impact on Dayang’s operations.

Maintain HOLD call with TP of RM0.87. We maintain our HOLD call with TP of RM0.87 based on 9x FY21 EPS. While the prospects for Dayang would seem very subdued at this juncture, we believe that the stock is fairly priced as share price has fallen by c.30% since our first downgrade report published on the 24th of August 2020.

Source: Hong Leong Investment Bank Research - 28 Oct 2020

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