Highlights

• As expected, the company was awarded with Maintenance, Construction & Modification (MCM) Package A from Petronas Carigali on 20th Sept 2017. Contract duration would be for a firm 5 years (Sept 2017- to Sept 2022) with 1 year optional extension.
• However, the contract value was not announced as the details of the work scope for the contract is dependent on the final work orders issued (which may vary dependent on market conditions) during the contract period.
• Our channel checks and our back-of-the-envelope calculation shows that the portion that Dayang had secured is in the excess of circa RM1bn or higher, which represents a significant boost to its current orderbook of circa RM3bn.
• The proposed dividend-in-specie in form of Perdana shares has been approved by shareholders in EGM held on 9th Aug 2017. Completion of the exercise has been postponed from its original target of early Sept 2017 as per circular, as Bursa Malaysia is still determining the pricing of Perdana shares upon share distribution.
• We believe that the pricing process is trickier for Perdana as its last traded price was at RM1.55/share, which was way back in 2014. It is understood that the deal would be completed before end of 2017 and it is expected to give Dayang’s shareholders a decent yield from the distribution.
• Based on our valuation of RM0.31/share for Perdana, the yield would be at 13% based on latest Dayang share price. We opine that the final value of Perdana share price would be significantly higher due to its steep discount to last traded price and improvement in vessel utilisation.
• Overall, 2018 will be a better year for Dayang group as HUC work orders is expected to pick up, backed by RM3bn orderbook.
• In addition, we also expect Perdana’s vessel utilisation to improve on the back of higher activities especially in the maintenance segment.

Forecasts

• Unchanged.

Risks

• Fluctuation in oil price.

Rating

BUY ↔

• Completion of incoming corporate exercise represents a catalyst for the company with high dividend yield expected to be generated from distribution of dividend-in-specie. Medium term outlook is positive for the group riding on incoming contracts to be dished out in the sector.

Valuation

• We maintain Buy with unchanged TP of RM1.20 based on SoP.

Source: Hong Leong Investment Bank Research - 10 Oct 2017