Dayang Enterprise (Dayang) secures two contracts for the provision of Pan Malaysia Maintenance, Construction, Modification (MCM) and Hook and Commissioning (HUC) services for Package A3 (Sarawak Asset SKA Oil) and A5 (Sabah Asset SBA Southern) from Petronas Carigali. The contract duration is 5-year plus three- and two-years extension options (5+3+2). There is no contract value announced as it is based on call-out work order, however, we estimate the combination of both contracts is approximately worth RM3.0bn for the first five years. The contract award is broadly within our estimates as we have highlighted in our previous reports. We make no changes on our estimates as the contract is part of our orderbook replenishment. We maintain our Outperform call and TP of RM4.65.

• Contracts award is testament of Dayang's reputation. The intense competition in this round of bidding process did not stop Dayang from securing the largest MCM and HUC package i.e. Sarawak Asset Oil portion. The contract secured is a testament of Dayang prominent track records, readiness facility, financial and manpower capacity to execute the contract. We believe Dayang's strong establishment in Sarawak is vital to ensure the operational efficiency in executing MCM and HUC contracts in the state. On this note also, we believe Dayang would be the frontrunner for decommissioning work packages especially in Sarawak, which is expected to be awarded in mid-2025/2026.
• Orderbook soaring high. Including the two contracts, we estimate Dayang's orderbook now has jumped to RM5.4bn. The orderbook consist of RM4bn from three MCM and HUC contracts for the next 5 years, RM1.2bn Asset Integrity Findings (AIF) until 2026, while the remaining is the expiring MCM and HUC contracts, which reaching tail-end by December 2024.
• 3QFY24 earnings preview. Dayang set to announce its 3QFY24 by next week. We expect its Marine segment continues to record significant growth on the back of higher daily charter rate and elevated utilisation rate. To recap, Dayang achieved 91% of utilisation rate in 2QFY4 and we believe 3QFY24 utilisation rate will remain at the similar level or higher. Meanwhile on its Topside Maintenance segment, we expect a slight weakness on QoQ given the existing MCM and HUC contracts are reaching the tail end. Overall, Dayang would record significant earnings growth YoY basis, however, flattish or slight weaker on QoQ basis.

Source: PublicInvest Research - 14 Nov 2024