DAYANG announced being awarded a 15-month hook-up, commissioning and topside maintenance contract from Petronas Carigali, starting Aug 2019. We guesstimate contract value to be roughly around ~RM100-200m, fetching mid-teens EBIT margins. Overall, we are positive on the contract win, highlighting DAYANG’s job delivery capabilities. Maintain MARKET PERFORM with an unchanged TP of RM1.45.

15-month contract from Petronas Carigali. DAYANG announced being awarded a contract for the provision of hook-up, commissioning and topside major maintenance services for Petronas Carigali Sdn Bhd – Peninsular. The duration of the contract is for a period of 15 months, effective from 16 Aug 2019 and will expire on 15 Nov 2020.

Impact from the contract. While no value or other contract details were included in the announcement, we guesstimate the contract value to be somewhere within the region of ~RM100- 200m. Of course, actual contract value would depend on the work orders received. We believe the contract would be able to fetch EBIT margins at around the mid-teens region. With this contract, we expect DAYANG’s order-book to remain >RM3b, bringing the YTD-announced new contract wins to an estimated value of ~RM450-600m (still well within our replenishment assumption of RM1b).

Positive on the contract win. We also posit that the contract could possibly serve as an “interim” contract while a possible retendering of Petronas Carigali’s integrated hook-up and commissioning contract is underway, as reported in the press. Nonetheless, we are positive on the win as it highlights the company’s job delivery capabilities, thus enabling its clients’ confidence in awarding DAYANG work contracts.

Maintain MARKET PERFORM, with an unchanged SoP-TP of RM1.45. Note that our TP has already taken into account full share-base dilution from the proposed corporate exercises (~20% dilution). Our TP, which implies a forward PBV of 1.4x, is already priced near +1SD premium against its 5-year mean. No changes made to our FY19-20E numbers.

Risks to our call include: (i) greater-than-expected work orders, (ii) higher-than-expected vessel utilisation, (iii) stronger-thanexpected margins, and (iv) falling through of corporate exercises.

Source: Kenanga Research - 4 Sept 2019