Daya announced yesterday that its subsidiary Daya OCI SB (DOCI) and its joint venture (JV) partner had been given a letter of award (LOA) from Boustead Naval Shipyard SB for HVAC (Heating, Ventilation and Air-Conditioning) works amounting to about EUR49.4m (RM199m). We view this development positively as the company is increasingly positioning itself in the oil and gas business.

Making good progress in O&G segment. DOCI and Cofely Axima, a 60:40 JV will undertake the ventilation jobs for 6 new Royal Malaysian Navy vessels. The scope of the project is to design, supply, install, test and commission HVACs for the period of approximately 4 years with an approximate 20% pre-tax margin.

Aiming for another O&G contract. We understand that Daya is in negotiation with multiple parties for a long-term charter rate of approximately RM600m for its first vessel Siem Daya 1 (refer to our note on 29 Jan 2013). The agreement is expected to be finalised by May/June 2013. Hence, we believe given the secured and potential contracts, we see Daya's 2Q13 earnings and going forward entering an exciting phase.

Reiterate Outperform call. We are maintaining our target price of RM0.28 as we had earlier factored in some order book replenishment. Our valuation of Daya is based on 12x multiple over FY13 EPS of 2.34 sen. We also introduce our FY15 estimates.

Source: PublicInvest Research - 03 May 2013