Yesterday,  Dayang  Enterprise  announced  its  first  EPCC  contract  win worth MYR280m from Petronas Carigali for the Bardegg-2 and Baronia EOR project.  Maintain BUY, with a higher TP of MYR3.86 (63.5% upside) based on a 13x FY15F P/E. We also keep our earnings for FY14 but lift our FY15F/FY16F earnings by 3%/2% respectively.  
 
Salient  details.  The  MYR280m  contract  marks  Dayang  Enterprise’s (Dayang)  first  foray  into  engineering,  procurement,  construction  and commissioning  (EPCC)  work.  The  contract  is  for  a  duration  of  36 months,  effective  from  Dec  2014  to  Dec  2017,  or  until  the  works  are completed.  The  contract  is  for  the  provision  of  brownfield  major modification work for the Bardegg-2 and Baronia enhanced oil recovery (EOR) project off the coast of Sarawak, awarded by Petronas Carigali.  

Bardegg-2  and  Baronia.  The  Bardegg-2  and  Baronia  EOR  project between Petronas Carigali and Shell aims to increase the recovery factor of these fields up to 45% from 30%, after almost 30 years of production. These  gas  fields  will  feed  into  the  Bintulu  liquefied  natural  gas  (LNG) facility. We believe production of these gas fields will continue  even on the back of the weakness in crude oil prices.

Orderbook  at  MYR4.2bn.  With  the  new  contract  win,  Dayang Enterprise’s orderbook  currently  stands  at  MYR4.2bn,  which  will  keep the  company  busy until  2018.  The majority  of  its  orderbook  consists  of the  MYR3.5bn  pan-Malaysia  hook-up,  construction  and  commissioning contracts. Dayang’s current tenderbook currently stands at MYR1.5bn, and is made up mostly of topside major maintenance project bids.

Maintain BUY, with new TP of MYR3.86. We increase our FY15/FY16 earnings  by  3%/2%  respectively.  We  also  maintain  our  BUY recommendation  with  a  higher  TP  of  MYR3.86  (from  MYR3.73),  based on  a  13x  FY15F  P/E. We  continue  to  like  Dayang  as  it  is  the  premier local oil and gas services player and has an excellent track record. The stock is currently trading at a 7.1x FY15F P/E.

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Dayang 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.

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Source: RHB