Daya announced the price fixing date yesterday for its proposed private placement announced on 21 October 2013. The issue price has been fixed at RM0.345 per placement share representing a discount of approximately 9.7% to the 5-day volume weighted average price (VWAP) of Daya shares. The VWAP is up to and includes 17 December 2013 of RM0.3821 per share. We believe the placement exercise would aid in the Group to pare down its existing borrowings which was undertaken to finance the offshore cable laying operations. In addition, the proposed repayment of borrowings is expected to result in interest savings of c.RM1.76m per annum. We maintain our Outperform call but our TP is revised to RM0.43 to reflect the dilutive effects of the placement premised on 12x FY14 EPS of 3.37 sen but adding back the RM43.4m proceeds.

The details. New ordinary shares of RM0.10 each in representing up to 10% of the issued and paid-up share capital of Daya as placement shares. The payments from the placee(s) are expected to be received within 5 market days from the Price-Fixing Date of 18 December 2013.

Utilisation of proceeds. To recap from our previous note, bulk of the proceeds from the placement will be used to refinance existing borrowings and partly on working capital. We understand that this will pare down the existing borrowings which was undertaken to finance the offshore cable laying operations. In addition, the proposed repayment of borrowings is expected to result in interest savings of c.RM1.76m per annum.

Dilutive impact. The proposed placement is expected to have a dilutive effect on Daya‟s FY14 EPS. Based on the enlarged share capital of 1,383.6m, our forecasted FY14 EPS will be diluted by approximately 5% to 3.37sen from 3.71sen. Adding back the RM43.4m proceeds based on the placement price fixed at RM0.345 per share, our TP will be revised to RM0.43.

Maintaining Outperform. Albeit the revision of our TP from the dilutive effects of the placement, we concede that Daya still has prospects for further re-rating pending the clarity of securing the new O&G contracts. The Group‟s outlook remains bullish with an orderbook worth about RM2.1bn which will provide the Group‟s earnings visibility up to FY17.

Source: PublicInvest Research - 19 Dec 2013