News

Dayang proposed bonus issue up to 275m shares on the basis of one bonus shares for every two existing Dayang shares.

The proposed bonus issue is expected to be completed by 1Q 2014.

The issued and paid up share capital as at 29 November 13, is 550m shares.

Comment

We are slightly positive on the proposed bonus issue as it will enhance the liquidity and marketability of the shares.

Given the 1-for-2 bonus issue, total number of shares will enlarge to 825m shares.

Net asset per share expect to adjust from RM0.99 to RM0.66 based on the enlarged 825m shares.

Many of the offshore platforms in Malaysia are over 20 years of age and urgently needs upgrading. These HUC and topside maintenance contracts are normally recurring every 5 years. Given Dayang’s strong track record and execution abilities, we believe Dayang will continue to be the winner and is emerging as a power house offshore HUCC player in a region of aging O&G infrastructure.

Risks

Political risk; Delays in contract disbursement; and Execution risk.

Forecasts

Unchanged.

Rating

BUY

Positives –

• solid track record and expertise in HUC.
• captive market for topside maintenance.

Negatives –

• unsure of international growth prospects.
• difficulties in sourcing O&G engineering talent.

Valuation

We maintain our BUY call with an unchanged TP of RM6.87 based on an unchanged 14x FY14 EPS of 49.1 sen/share. Post the exercise, the ex-share price and ex-target price will be adjusted to RM3.57 and RM4.58 respectively.

Source: Hong Leong Investment Bank Research - 9 Dec 2013