Tracking the sluggish Energy index (-18% from YTD high), DAYANG’s share price slipped 15% from a 52-week high of RM1.65 to RM1.40 last Friday, as sentiment was dampened its weak 1Q21 results, a knee-jerk selloff in O&G stocks following SERBADK’s audit saga, and persistent sell down by Urusharta Jamaah (8% stake as at end May) amid portfolio reengineering. Nevertheless, DAYANG’s risk-reward profile is turning attractive after recent fall amid undemanding valuation at 9.8x FY22E P/E (31% lower against 10Y average 14.3x and 43% lower than peers 17.3x), as earnings upcycle (after a sluggish FY21) is expected to stage a 62% EPS CAGR rebound from FY21-23 premised on: (i) higher maintenance, construction and modifications contracts (MCM) and topside maintenance services (TMS) works under the Pan Hook up and Commissioning Contract (Pan HUC) due to improving operating climate and renewed activities by Petronas, sustained by the recent oil price strength (commitment from OPEC+ to keep oil prices afloat). Downside risk is limited, boosted by solid balance sheet (with net cash flow RM234m-267m for FY22-23E) and strong orderbook of RM2.5bn to sustain minimum 2-year earnings visibility.

Pending a downtrend resistance breakout. After correcting from 52-week high of RM1.65, DAYANG has found a strong base near RM1.30 (21 May low) before closing at RM1.40 last Friday. With prices trading above lower BB (RM1.33) and 100D SMA (RM1.37), the stock is poised for a downtrend line breakout soon (near RM1.46), supported by bottoming up technical indicators. A successful breakout above this hurdle augurs well for the stock to advance further towards RM1.53 (10 May high) before reaching our LT target at RM1.65. Supports are pegged at RM1.30-1.37. Cut loss at RM1.29.

Source: Hong Leong Investment Bank Research - 8 Jun 2021