DEHB’s  FY13  core  net  profit  of  MYR116m  reached  97/84%  of our/consensus  estimates, after incorporating  a MYR32.8m one-off item. While  its  FY13  performance  was  hampered  by  mobilisation  costs,  it began major HUCC works in  4Q13.  We trim our FY14F  earnings by 8% as  we  prefer  to  be  more  conservative  on  revenue  recognition  of  its HUCC works. Maintain BUY, with our adjusted ex-bonus FV at MYR4.60.

• FY13 core net profit in line.  Dayang Enterprise (DEHB)’s core profit of MYR116m was in line with our expectations, but below  consensus  -  at 97% and 84% of the respective full-year estimates. Core profit grew 15% due to a one-off MYR33m reclassification of  an  investment in associate Perdana Petroleum (PETR MK, NEUTRAL, FV:  MYR1.90), and  a  lower blended  margin  (of  20% vs 25% in FY12)  owing to  higher mobilisation costs  incurred  to  prepare  for  hook-up  and  commissioning  (HUC)  and topside maintenance (TMS)  works.  Its TMS jobs  were typically affected by  the  monsoon  season  in  1Q  and  4Q  of  the  financial  year.  In  4Q13, EBIT margins fell to 13% vs 19% in 3Q13 and 15% in 4Q12.
• Work  orders  pick  up.  Revenue  surged  40%  y-o-y  due  to  higher  fleet utilisation  (DEHB  took  delivery of a workboat, MV Dayang Opal)  and the higher-value TMS/HUC jobs  secured. In 4Q13, DEHB commenced  HUC works  in  relation  to  a  contract  from  Shell.  It  was  awarded  MYR4.2bn worth of Pan Malaysia HUC jobs  in May 2013.  The delivery of one more vessel  November this year  will bring  its  own  fleet to nine vessels, while its earnings visibility is secured until 2018.
• Maintain  BUY,  with  our  adjusted  ex-bonus  FV  at  MYR4.60  (from MYR6.72  cum-bonus).  We trim  our  FY14F  earnings  by  8%  following a 17%  cut  in  our  revenue  forecast  as  we  believe  the  commencement  of some of the HUC works may take longer than  expected. Still, we believe DEHB deserves a higher  16x  P/E (vs 15x previously, in line with smallto  mid-cap  O&G  valuations),  supported  by  a  2-year  forward  earnings CAGR of 55%. PETR’s investments  put  DEHB  in a  favourable position when  tendering  for  projects,  as  well  as  helping  the  latter  move  to  a higher  league. The company has ample  room to  gear  up  to expand  its capabilities  across  the  oil  &  gas  value  chain,  which  could  potentially provide room for a rerating over the longer term.

Financial Exhibits

Company Profile
Dayang  Enterprise  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