INVESTMENT HIGHLIGHTS

• Dayang Enterprise Holdings Bhd’s (Dayang) once again posted a commendable profit of RM47.1m for 4QFY16

• Vessel utilisation rate for 2017 expected to be 60-70%

• Total orderbook still remains strong at approximately RM2.8b – burn rate until 2018

• Tenderbook at RM4b

• Maintain NEUTRAL with an unchanged target price of RM0.95 per share

Exceeded expectations. Dayang’s 4QFY16 PATAMI posted a commendable figure of RM47.1m, bringing full year FY16 earnings to RM54.9m, exceeding our and consensus full year expectations. Excluding the unrealised forex gains, the company’s full year FY16 business would have still maintained profitable.

Higher vessel utilisation rate moving forward. Moving forward, we believe that the vessel utilisation rate for the company will be better compared with that of FY16. We are expecting a vessel utilisation rate of approximately 60-70% for FY17, higher than the South East Asian average of 50-60%.

Current orderbook. Dayang’s current orderbook currently stands at RM2.8b 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.

Perdana Petroleum holding its weight up. With Perdana Petroleum’s financials improving premised on aggressive cost cutting initiatives and also business strategies put in place to strengthen the business, we believe that Perdana Petroleum could be contributing to the group in a more positive manner moving forward.

Maintain NEUTRAL. We are maintaining our NEUTRAL stance with an unchanged target price of RM0.95 per share. At current market price level, we opine that further upside potenial is limited. Nonetheless, we are still positive on Dayang as we expect the company to perform well moving forward premised on: (i) expected positive earnings moving forward; (ii) strong stable orderbook from top tier clients; (iii) strong frontrunner for Petronas MCM works; (iv) undemanding trading valuation and; (v) earnings contribution from Perdana Petroleum. Our target price is based on PER17 of 12.5x pegged to EPS17 of 7.6sen. The target PER17 is based on a 0.5-standard deviation discount to the company’s five-year average rolling PER of 15x.

Source: MIDF Research - 23 Feb 2017