• Dayang has secured packages A3 and A5 for the provision of MCM works for Petronas Carigal
   
• Combined contract value estimated to be RM3bn, each with a duration of 5+3+2 years
   
• Maintain BUY rating with RM4.50 target price

Awarded packages A3 and A5 from Petronas Carigali

Dayang announced that its wholly-owned subsidiary, Dayang Enterprise Sdn Bhd, has secured a Maintenance, Construction, Modification (MCM), and Hook-Up Commissioning (HUC) services contract for Package A3 (Sarawak Asset) and Package A5 (Sabah Asset) from Petronas Carigali Sdn Bhd. The contract will be effective from 27 Sep 24 and has a duration of 5 years, with the option to extend for an additional 3+2 years.

2 more MCM contracts secured

Including the two new contracts, Dayang secured a total of 4 packages out of the 18 available HUC/MCM Pan Malaysia packages. We gather that these two packages involve only MCM work. We estimate the contract value of Package A3 to be c.RM2.2bn and Package A5 to be RM800m, bringing the combined contract value to RM3bn. This would translate to annual revenue of RM600m over the next five years. Assuming an EBIT margin of 35%, this would imply an operating profit of RM210m from 2025-29, representing 39% of our existing 2025E forecast. These contract wins are expected to bring Dayang’s total outstanding order book to c.RM5.2bn. With these two packages secured, only 10 HUC/MCM Pan Malaysia packages remain unawarded, and we believe Dayang stands a good chance to win more packages, being an incumbent player in the HUC/MCM space.

Reiterate BUY with RM4.50 target price

We maintain our earnings forecast, as this contract win falls under our order book replenishment assumptions. Inclusive of Package B4, this represents 71% of our 2025 order book replenishment. Dayang is trading at an attractive 8x 2025 PE, supported by its sizable order book and attractive earnings growth prospects. We reiterate our BUY rating and RM4.50 target price based on an unchanged 16x PE multiple on 2025E EPS. Key risks to our BUY call include unforeseen delays in work orders, contract awards, and higher-thanexpected operating costs.

Source: Phillip Capital Research - 14 Nov 2024