DEHB’s MYR60.6m  1H13  core  net  profit  accounted  for  37%  of  our  and 40%  of  consensus  FY13  estimates.  We  consider  the  results  in  line, because  earnings  will  likely  be  boosted  in  2H13  by  the  new  contracts secured earlier this year. We continue to like this stock for its defensive qualities  and  excellent  track  record.  Maintain  BUY  with  an  unchanged FV of MYR6.50.

- In  line.  DEHB’s 1H13 core net profit of MYR60.6m (+38.9% q-o-q, +28.6% y-o-y) accounted for 37.0% of our and 39.7% of consensus full-year  estimates.  We  consider  the  results  in  line  despite  the  shortfall,  as earnings  will  be  lifted  in  2H13,  bolstered  by  new  contracts  secured earlier  this  year.  Revenue  (+26.9%  q-o-q,  +5.3%  y-o-y)  grew  steadily, mainly  due  to  higher  fleet  utilisation  and  higher  revenue  from  topside maintenance services.

- Sweetener for shareholders. DEHB declared its first interim dividend of 5 sen per share as a reward to its loyal shareholders. We retain our net dividend  forecast  of  MYR0.15  per  share  as  earnings,  based  on  a  50% net payout ratio (in line with its historical average).

- Potential  downward  revision  of our FY13  forecasts. We  believe  that DEHB’s  net  margins  will  likely  slide,  as  it  will  need  to  strengthen  its manpower  and  charter  new  vessels  to  cater  for  the  new  jobs  secured. Mobilisation costs, which are incurred at the initial stage of a new project, could also contribute to lower margins, although it will be a one-off cost. However, this may be partially offset by a positive earnings contribution from Perdana Petroleum (PETR MK, NEUTRAL, FV: MYR1.80), in which DEHB owns a 26.1% stake.

- Maintain  BUY.  We  believe  the  stock  should  re-rate  higher,  given DEHB’s clear earnings visibility for the next five years,  coupled  with  its solid execution track record. At 15.0x FY14F EPS (in line with the sector average),  we  value  DEHB  at  MYR6.50  per  share.  We  also  believe another re-rating catalyst comes from its market capitalisation breaching the USD1bn level, as the company will then appear on the radar of more institutional investors. 

Source: RHB