INVESTMENT HIGHLIGHTS

• Dayang Enterprise Holdings Bhd’s (Dayang) winner of MCM Package A (Offshore Sarawak portion)

• 5-year contract estimated to be worth more than RM1b

• Earnings upcycle to start in 2HFY18

• Total orderbook in excess of RM3b

• Downgrade to Trading Sell to profit from news flow with unchanged TP of RM0.83 per share

MCM win. As speculated since the introduction of PETRONAS’ Maintenance, Construction and Modification (MCM) work packages which replace the previous Hook-up and Commissioning (HUC) packages, Dayang has emerged as one of the project winners. Although no definitive value was given to the 5-year Package A or Sarawak Offshore Oil Portion of the MCM works, we believe that the total contract value is worth more than RM1b. The contract is effective from 20 September 2017 to 19 September 2022.

Current orderbook. Inclusive of this new win, Dayang’s current orderbook currently stands at more than RM3b lasting through into 2022.

Dayang’s forte. Dayang is no stranger to Petronas maintenance, construction and modification (MCM) works as it was the incumbent for the previous HUC contracts from 2013. Currently, 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 6 years old. All of which are fit for purpose, within the stringent specifications required by Petronas and its production sharing contractors.

Impact on earnings. We are maintaining our earnings forecasts at this juncture as this win is within our expectations. In addition, we believe that plannning and mobilisation of offshore assets will take place in the 1HFY18 which implies that actual pickup in activities will only start in 2HFY18 where earnings will be meaningfully recognised.

Earnings upcycle to start in 2HFY18. As we expect Dayang’s earnings upcycle to start in 2HFY18, we are recommending investors to adopt a Trading Sell position to profit from positive news flow.

Source: MIDF Research - 2 Oct 2017