DAYANG announced a PM-MCM contract win from Nippon. While no value was mentioned, we guesstimate a value of c.RM100-200m, bringing YTD-wins to c.RM1.2b. While we are positive on the win, we made no changes to our forecasts as this is within our FY18 replenishment assumption of RM1.5b, imputing an additional 1-2 wins for the remainder of the year. Reiterate OP and TP of RM0.98, with earnings delivery and further wins as re-rating catalysts.
PM-MCM contract win from Nippon. Yesterday, DAYANG announced that it has secured a Provision of Pan Malaysia Maintenance, Construction and Modification (PM-MCM) contract from JX Nippon Oil & Gas Exploration (Malaysia) Limited (Nippon), for five years up to 2023.
Positive on the contract win. While no firm contract value was mentioned, as the actual value is dependent on work orders being issued, we estimate the contract value to be roughly c.RM100-200m. Overall, we are positive on the contract win, as (i) we reckon this is an extension to Nippon’s prior topside major maintenance contract awarded to DAYANG back in 2013, thus indicating its commendable job execution and ability to retain clients, while also (ii) providing added jobs flow and earnings visibility.
More contract wins still expected. Likewise, this contract brings DAYANG’s YTD-wins to a guesstimated total value of c.RM1.2b, against our FY18 order-book replenishment assumption of RM1.5b, implying another 1-2 more contract wins for the remainder of the year. Given that the current landscape is geared more towards costs optimisation, we believe EBIT margins for these recent wins would be within the range of 10-20%, as opposed to 20-25% previously. All-in, we made no changes to our FY18-19E assumptions.
Reiterate OUTPERFORM and an unchanged SoP-TP of RM0.98, with catalysts stemming from: (i) further contract wins, (ii) earnings delivery, and (iii) improved outlook in PERDANA.
Risks to our call include: (i) weaker-than-expected HUC/TMM work orders, and (ii) prolonged downturn in OSV market.
Source: Kenanga Research - 30 Aug 2018
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