News

• Dayang’s 98% owned subsidiary, Perdana Petroleum, proposed private placement to raise up to RM109m.

• 60% of the proceeds raised would be utilised to repay borrowings while the remaining 40% would be utilised for working capital and listing expenses.

• It would be implemented after completion of Dayang’s distribution of dividend-in-specie in form of Perdana’s share announced last Friday.

• Completion of placement is expected to be in 4Q17.

Financial Impact

• Overall, slight positive to the group as the placement would reduce Perdana’s gearing risk especially in times of weak OSV activities.

• Interest cost savings per annum is circa RM2.7m (based on RM65.4m slated for debt repayment).

• Dilution impact on Dayang shareholders holding in Perdana shares would not affect our SoP valuation as our implied value for Perdana is at 70% discount to indicative price of placement (10% discount to WAMP of 5 market days).

• Therefore, we believe downside risk to our SoP valuation is limited due to the conservative valuation on Perdana Petroleum.

• Moreover, we expect placement price of Perdana’s share is likely to be higher than our implied fair value for Perdana, which provides further potential upside to our SoP.

• In addition, the placement would also improve the liquidity of Perdana Petroleum, which would help to ease its equity financing efforts in the longer run.

Forecast

• Maintained

Rating BUY( ↔ )

• The announced dividend-in-specie would better reflect the value of its stake in Perdana. In 2017, HUC activities are expected to pick up and its bread and butter HUC and topside maintenance business would register stronger earnings. The group is also a strong favourite to get a share of the pie from the upcoming MCM and Pan Malaysia HUC contract packages.

Valuation

• TP is maintained at RM1.42 based on our SoP-driven valuation

Source: Hong Leong Investment Bank Research - 17 May 2017