After sliding 40% from its 52-week high of RM1.65 to a low of RM1.00 (on 16th August 2021), the stock staged a gradual rebound to close at RM1.14 last Friday. The stock is trading at an undemanding 8x FY22 P/E (60% lower against its peers’ average 20.2x) together with impressive 62% FY21-23 EPS CAGR premised on higher maintenance, construction, and modification (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.

In anticipation of further capex ramp up by Petronas in 2H21(1H21: RM12.6bn; FY21E: RM35bn), we reckon DAYANG 2H21 outlook to improve as offshore support vessel (OSV) demand is likely to increase to support drilling rigs, and would potentially enhance the group order books that currently stood at RM 2.5bn (able to sustain minimum 2Y earnings visibility). In addition, with most of its contracted assets are expected to be converted into revenue in 2Q21, we expect to see some improvement in the upcoming earnings.

HLIB reiterated a BUY rating in DAYANG (TP: RM1.60) with an overweight rating in Oil & Gas sector, underpinned by (i) buoyant oil prices, (ii) stronger commitment from OPEC+ to keep oil prices afloat, (iii) higher impending capex from Petronas in 2H21 albeit not at pre-Covid levels, (iv) timeline of vaccine rollouts and (v) the strong economic recovery from China, US and Europe that will boost oil demand.

Technically, the stock is pending for a U-shaped rebound. A strong breakout on its neckline RM1.15 levels will spur the price toward RM1.2-1.27 levels. Cut loss at RM1.05.

Source: Hong Leong Investment Bank Research - 6 Sept 2021