• HLIB has a BUY rating on Dayang with a SOP-derived TP of RM0.91, or 13.8% upside. We remain positive on Dayang as we expect earnings upcycle (after a sluggish FY17) to resume with a robust 50% FY16-19 earnings CAGR premised on: (i) higher topside maintenance services (TMS), Hook-up and Commissioning (HUC) contracts, Engineering Procurement Construction and Commissioning (EPCC) services amid improving operating climate and renewed activities due to recovery in oil prices as indicated in the Petronas’ activity outlook for 2017-2019 report and (ii) better utilisation of its 25 offshore support vessels and vessel charter rates. Meanwhile, the fleet utilisation at Perdana (55% subsidiary) should also improve going into 2018 as more than 9 vessels out of a fleet of 16 will be earmarked for Dayang’s offshore maintenance, HUC and EPCC contracts, in line with the roll-out of Dayang’s contracts with various oil majors.

• As at end 2017, Dayang’s orderbook stood at RM2.8bn. In addition, the group is actively bidding for maintenance, construction & modification (MCM) and HUC contracts from Petronas and Pan Malaysia packages, believed to be worth >RM6bn in total consisting of several packages, indicating better prospects on orderbook replenishment.

• Bullish downtrend line breakout may spur prices to retest RM1.00 levels. Following the bullish triangle breakout yesterday, Dayang’s share prices are expected to break the weekly downtrend channel at RM0.825 soon. A decisive penetration above RM0.825 will spur prices higher to retest YTD high of RM0.92 (23 Feb high) and our LT objective of RM1.00 (61.8% FR). Key supports are situated near RM0.76 (100d SMA) and RM0.745 (support trendline). Cut-loss at RM0.73.

Source: Hong Leong Investment Bank Research - 27 Feb 2018