Dayang Enterprise (Dayang) has secured a five-year hook-up, commissioning (HUC) and topside maintenance job worth MYR313.6m from Murphy Sarawak Oil that may be extended by a year.  While the quantum is less than our MYR2bn estimate, it is the first from the Pan-Malaysia HUC tender. In anticipation of more contract awards being dished out very soon, we retain our BUY call, with our FV unchanged at MYR4.30, pegged to 15x FY14 EPS.

- Merely the tip of the iceberg. We understand that this is the first contract to be awarded among the Pan-Malaysia HUC tenders. The contract value is small as it only covers oil platforms in Bintulu and Kikeh. We expect other production sharing contractors (PSCs) to announce the winners of  more higher-value contracts soon.

- Bringing in MYR53m-MYR60m in annual revenue. Based on the tenure and value of the contract, Dayang will register some MYR53m-MYR60m in annual revenue for the next five years. Assuming net margins of 18%-20%, the contract would lift Dayang's bottomline by an estimated MYR10m-MYR12m p.a. 

- No changes to our earnings estimates. As we have previously factored in MYR2bn worth of contracts to be awarded from the Pan-Malaysia HUC tender that will translate into an annual orderbook replenishment of MYR200m, we are making no changes to our earnings estimate for now. As we are positive that the company could potentially secure contracts exceeding MYR1.7bn, we estimate that every MYR100m in contract value secured would lift our FY14 earnings estimate by 14.3%.

- Maintain BUY. Dayang remains our top mid-cap oil & gas pick. We value the stock at MYR4.30, pegged to 15x FY14 EPS. Despite its recent price rally, the stock still offers a dividend yield of 2.9% for FY13 and 3.8% for FY14, assuming a dividend payout ratio of 50.0%.

Source: RHB