DEHB proposed a 1-for-2 bonus issue (BI) of up to 275m shares. This marks its  second bonus issue exercise  (since 2010) to date,  intending to  boost  liquidity.  We  are  upbeat  on  this,  as  it  signals  management’s confidence and reaffirms our positive  outlook. Maintain BUY, with  our FV  still  at MYR6.72  -  which can be  potentially  adjusted  to MYR4.48 to reflect the enlarged paid-up capital of 825m shares.

• Second bonus issue. The BI exercise is expected to be fully-capitalised from  its  share  premium  account  of  MYR108m  and  retain  earnings  of MYR30m. Previously, DEHB carried out a 1-for-4 BI followed by a rights issue in early 2011. We are pleasantly surprised on the proposal as it will enhance trading liquidity,  given that the company’s market capitalisation has expanded by >570% since its listing in April 2008.
• Positive  outlook  on  earnings  visibility.  DEHB  remains our  Top  Pick given:  i)  its  hook-up  and  commissioning/topside  maintenance (HUCC/TM)  expertise,  ii)  more  associate  contributions  from  Perdana Petroleum  (PETR  MK,  NEUTRAL,  FV:  MYR1.82),  and  iii)  margin expansion from new HUCC/TM work orders in 2H13 after initial startup costs.  We believe its  current  price has not fully captured  its outstanding MYR5.0bn orderbook (including a milestone MYR4.2bn  job  secured for the Pan Malaysia cluster in May 2013), which provides earnings visibility through 2018.
• Potential  upside  on  marine  division.  We  expect  more  long-term demand for marine vessels and work barges during the installation and commissioning phase of offshore platform projects.  Sources  suggested that  riser platforms  and liquefied natural gas (LNG)  trains for the Block SK-316  could  be  commissioned  as  early  as  2015  for  the  Bintulu  LNG complex.  We  believe  DEHB  had  already  made  plans  to  capture  such opportunities - it has a strategic charter of 5-6 marine vessels from PETR for  the  Pan  Malaysia  HUCC  works.  An  additional  two  vessels  (to  be delivered in Dec 2013 and Nov 2014 respectively) will bring its own fleet to a total of nine vessels.
• Maintain  BUY.  We  keep  our  FV  of  MYR6.72  (at  an  unchanged  15x FY14F  P/E,  in  line  with  other  small-  to  mid-cap  oil  &  gas  companies). Our ex-bonus FV,  at MYR4.48,  accounts for our FY14F adjusted EPS of MYR0.30  (from  MYR0.45),  effectively  offering  a  30%  total  return  to  its adjusted share price last close of MYR3.56.

Recommendation Chart

Source: RHB