Dayang Enterprise (DEHB)’s 9MFY13 core net profit  of MYR92.5m  was below expectations,  at 56%/64% of  our/consensus’ full-year estimates, after adjusting for  a  one-off income  of MYR32.8m. We lower our FY13 numbers  in  anticipation  of  higher  mobilisation  costs  in  4QFY13,  but raise  our FY14  earnings estimate  as we  expect  more works done from its ongoing projects. BUY, with a new MYR6.72 FV (from MYR6.50).

• 9MFY13 core net profit below expectations. 9MFY13 core net profit of MYR92.5m (+4.5% y-o-y) fell short of expectations, making up 56%/64% of our/consensus’ full-year estimates respectively. Nevertheless, we note that  9MFY13  revenue  was  visibly  higher  (+17.1%  y-o-y)  due  to:  i) increased  work  orders  received  and  performed  for  its  topside  major maintenance/hook-up  construction  and  commissioning  (TMM/HuCC) projects, and ii)  a  higher  fleet utilisation rate of more than 90%.  DEHB recorded  a  MYR32.8m  one-off  income  in  9MFY13  after  the reclassification  of  its  investment  in  Perdana  Petroleum  (PETR  MK, NEUTRAL,  FV:  MYR1.82)  from  an  available-for-sale  investment  to  an equity-accounted  associate.  Contribution  from  its  investment  in  PETR amounted to 6% of 9MFY13 profit before tax (PBT).   
• EBIT  margin  to  improve  in  FY14.  Higher  mobilisation  costs  in preparation  of  TMM/HuCC  works  crimped  3QFY13  EBIT  margin  to 19.4% vs 33.9% in 2QFY13.  We believe  EBIT margin should normalise from FY14 onwards, in the range of 33%-37%, as the mobilisation cost is a one-off cost.  
• Five-year  earnings  visibility.  DEHB’s  orderbook  currently  stands  at MYR4bn,  with  the  majority  of  works  originating  from  the  TMM/HuCC projects  that  it  secured  throughout  FY13.  These  ongoing  projects  are expected to last until FY18, giving DEHB five years of earnings visibility.
• Maintain  BUY;  higher  MYR6.72  FV.  We  cut  our  FY13  earnings estimate by 21% as DEHB may still be plagued by higher  mobilisation costs  in  preparation  of  more TMM/HuCC  works in  FY14.  However,  we raise  our  FY14  earnings  estimate  by  3%  in  anticipation  of  more TMM/HuCC  works  received  and  performed.  Maintain  BUY,  with  a  new FV  of  MYR6.72  (from  MYR6.50),  which  implies  an  unchanged  target FY14  P/E  of  15x,  in  line  with  other small-  to  mid-cap  oil  &  gas  (O&G) companies.

Financial Exhibits

SWOT Analysis

Company Profile
Dayang Enterprise (DEHB) is primarily involved in the provision of hook -up and commissioning, maintenance services as well as minor fabrication jobs for the oil and gas industry

Recommendation Chart

Source: RHB