DAYANG secured two Pan Malaysia maintenance, construction and modification (PM-MCM) contracts from Kebabangan Petroleum Operating Company Sdn Bhd (KPOC) and Repsol with a total sum estimated at between RM600-800m. YTD wins of c.RM 1 b exceeds our FY18 replenishment target of RM800m hence, we raise our FY18-19E earnings by 4-14%. BUY with TP of RM0.98

The two contracts are five-year contracts (until 2023), with an option to extend an additional year. While no firm contract value was mentioned as the actual value would be dependent on work orders being issued, it is estimated both contracts to be roughly worth RM600- 800m in value. 

Overall, we are positive on the contract wins as (i) they are secured from new clients, thus highlighting its competitiveness, while also (ii) providing added jobs flow and earnings visibility. YTD, DAYANG has secured an estimated contract value of c.RM 1 b, thus exceeding our previous FY18 order-book replenishment assumption of RM800m adding an additional c.50% to its latest outstanding order-book of around RM1.9b. 

Post-contracts award, we raised our FY18 orderbook replenishment assumption to RM1.5b (from previously RM800m), thus resulting in a 4-14% increment in our FY18-19E earnings. Given that the current landscape is more geared towards costs optimisation, we believe EBIT margins would mostly be in the range of 10-20%, and no longer similar to historical EBIT margins of 20-25%. 

Source: Rakuten Research - 21 Aug 2018