INVESTMENT HIGHLIGHTS

• Dayang Enterprise Holdings Bhd’s (Dayang) 3QFY16 earnings swung to the black at RM36.2m

• Higher vessel utilisation rate recorded

• Total orderbook still remains strong at approximately RM3.34b – burnrate until 2018

• Meteoric +21% rise in share price over five trading days

• Revert to NEUTRAL with an unchanged target price of RM0.95

Earnings swung to the black. Dayang’s 3QFY16 PATAMI swung into the black at RM36.2m after suffering two consecutive quarters of losses. Although the company’s reported 9MFY16 earnings posted a PATAMI of RM7.8m, its 9MFY16 normalised cumulative earnings (excluding unrealised forex gains of RM34.25m) is still in the red at approximately –RM26.4m. Nonetheless, there is a sliver of hope that the company could end the financial year with a normalised profit.

Higher vessel utilisation rate. Management guided that the stronger quarterly revenue was a direct result of higher vessel utilisation rate compared with previous quarters. In addition, favourable profit margin was recorded due to higher profit contribution from work orders performed during the quarter.

Current orderbook. Dayang’s current orderbook currently stands at RM3.34b lasting through to 2018. The company’s tenderbook is in the tune of approximately RM4b.

Frontrunner for MCM works. Moving forward, we believe that Dayang will be one of the frontrunners for the Petronas maintenance, construction and modification (MCM) umbrella contracts which are worth approximately RM5b in totality as Dayang has: (i) 7 work barges with an average age of 4.7 years old and; (ii) 9 work boats with an average age of 5.9 years old. All of which are fit for purpose, within the stringent specifications required by Petronas and its production sharing contractors.

Meteoric rise in share price. Since our upgrade to BUY in our report dated 16 November 2016, the share price has risen by +21.3% from RM0.75 to RM0.91 in the span of five trading days. We believe that there is renewed interest in the company as it has proven itself by undertaking positive measure on Perdana Petroleum Berhad and also the utilisation of its combined offshore fleet

Source: MIDF Research - 23 Nov 2016