HLIB Research pegged a RM1.60 TP for Dayang, based on 10.0x FY22 EPS and 0.7x P/B for its offshore service vessels (OSV) segment. We believe that Dayang should see a decent recovery in terms of its maintenance, construction and modifications contracts (MCM) and hook-up and commissioning (HUC) work activities from 2Q21 onwards. Moreover, its cost optimisation measures carried out in FY20 should be able to cushion any unforeseen decline in work activities amid the stricter adherence to SOPs.

After recent rout, DAYANG’s risk-reward profile is turning attractive again amid undemanding valuation at 7.3x FY22E P/E (57% lower than peers), as earnings upcycle (after a sluggish FY21) is expected to jump 25% EPS CAGR from FY20-23 premised on (i) higher 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. 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.

Technically, the stock is steeply oversold. Any weaknesses from current prices towards key supports at RM0.98-1.00 levels provide a good opportunity to accumulate. A strong breakout above RM1.08 (38.2% FR) will spur the price towards RM1.15-1.25 zones. Cut loss at RM0.94.

Source: Hong Leong Investment Bank Research - 6 Aug 2021