New Coverage
- Miri-based Dayang Enterprise has been in the oil and gas services since 1980. It currently provides maintenance services, minor fabrication operations and offshore hook-up and commissioning. The company’s latest foray is into the charter of marine vessels via: 1) charter of one of its workboats to Brunei Shell; and 2) purchase of 40% stake in Borcos.
- Investment case. 1) Premium net margins of above 20%; 2) Few notable competitors improve Dayang’s chances of winning contracts; 3) Earnings lift from Borcos venture as the industry improves going forward to FY11; and 4) Potential regional expansion, to countries like Brunei.
- We forecast EBIT margins of 26% for the topside-maintenance division and 23% for marine charter, which would lead to FY10-12 EBIT earnings of RM63.6m, RM79.4m and RM89.8m respectively. For Borcos we are conservative and forecast FY10-12 net earnings to be RM20-45m respectively which will result in RM8-18m associate contributions for Dayang.
- We value Dayang Enterprise at RM2.61/share based on FY11 PER of 13x (inline with the target PER for Kencana Petroleum and Sapuracrest Petroleum). Our fair value estimate implies a 26.6% upside to the stock’s current share price of RM2.06.
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