Dayang Enterprise; Buy
Price Target: RM4.00; DEHB MK

Dayang announced that its has been awarded a RM313.6m contract from Murphy Sarawak Oil Co. Ltd for the provision of hook-up, commissioning (HUC) and topside major maintenance services for 5 years (2013- 2018). The contract comes with a 1-year extension option as well.

The contract marks Dayang’s first order win in FY13, which we believe is a prelude to more major HUC contract awards. The Murphy contract is also part of the 5-year Pan Malaysia HUC project which is estimated to be worth more than RM10bn collectively. We understand that the HUC jobs to be awarded by Shell and Petronas Carigali are likely to be more susbtantial and Dayang stands as one of the frontrunners for the projects given its outstanding track record.

We have imputed RM2bn order win from the Pan Malaysia HUC project for Dayang. With the Murphy contract, Dayang has already achieved 16% of our projected contract wins. Its current order book of RM1.5bn will underpin strong earnings visibility over the next 3 years. We estimate every RM500m increase in our Pan Malaysia HUC order win assumption would raise FY14F earnings by 11%.

We maintain our Buy rating with RM4.00 TP (based on 15x FY14 EPS). We believe that winning a chunk of the 5-year HUC mega project will be a game-changer for the company – it will accelerate growth over the next 5 years.

Source: HwangDBS Research - 7 May 2013