Dayang  Enterprise  proposed  a  private  placement  of  up  to  10%  of  its issued and paid-up capital of Dayang Enterprise where the issue price will be determined at a later date. The private placement is expected to raise up to MYR304.4m based on an indicative issue price of MYR3.69 per  share.  Our  fully-diluted  TP  will  be  adjusted  to  MYR4.44  from MYR4.80 to account for the larger share base.

Salient  details.  The  private  placement  is  expected  to  raise  estimated proceeds  of  up  to  MYR304.4m,  which  is  based  on  an  indicative  issue price  of  MYR3.69,  which  is  the  volume  weighted  average  price  of Dayang Enterprise’s share price up to 26 Aug. 98.3% of the proceeds of the  placement  will  be  used  for  working  capital  as  well  as  potential investment projects in the future. 

Strong  orderbook.  Dayang’s  orderbook  stood  at  MYR4.2bn.  The MYR1.3bn  Petronas  hook-up,  construction  and  commissioning  (HuCC) contract, which is still seeing a ramp-up in activities, is expected to be in full  swing  only  in  1Q15.  Meanwhile,  we  believe  Petronas’  topside structural  maintenance  (TSM)  contract  stands  a  good  chance  in  being extended  beyond  1Q16.  Shell’s  HuCC  contract  (MYR2.4bn)  has  been fully mobilised since end-1Q14 and is currently running at full capacity. Dayang  is  currently  bidding  for  MYR400m  worth  of  engineering, procurement,  construction  and  commissioning  (EPCC)  jobs,  with  the outcome likely to be known by end-3Q14. 

EPCC,  the  next  growth  driver.  We  estimate  Dayang’s  net  cash  after placement  to  be  MYR243.9m.  We  are  positive  on  this  cash-raising exercise  as  the  proceeds  will  be  used  to  fund  more  projects  going forward. We are confident that the company’s next phase of growth   will be from EPCC jobs, which the company is now tendering for. We believe Dayang stands a good chance to win EPCC contracts as it has proven itself to be more than capable in undertaking HuCC/TSM jobs for the oil majors and  EPCC  is the  next  logical  step  for the  company.  Our  FV is pegged to a 16x FY15F P/E, a slight premium above the small-  to midcap  oil  and  gas  companies’  P/E  of  15x,  supported  by  a  45%  2-year forward earnings CAGR. We maintain our BUY recommendation with an unchanged FV of MYR4.80,  although we note that our FV estimate will be adjusted to MYR4.44 on completion of the placement exercise.

Source: RHB