Dayang poised to gain from Pan-Malaysia deals


CIMB Research has kept its FY24 to FY26 earnings projections unchanged.

PETALING JAYA: Analysts are positive about Dayang Enterprise Holdings Bhd’s prospects, given its potential to secure more Pan-Malaysia-related contract packages in Sarawak.

Dayang recently bagged a new contract win, the Pan-Malaysia maintenance, construction, modification and hook-up commissioning services (MCM-HUC) for Package B4 from Sarawak Shell Bhd (SSB) and Sabah Shell Petroleum Co (SSPC).

The contract marks Dayang’s first package win out of the 18 available Pan-Malaysia packages, 15 of which are MCM, with the remaining three being HUC packages.

Phillip Capital Research in a report said: “We estimate this contract to be relatively larger than the rest at about RM1bil, translating to an annual RM200mil revenue over the next five years.”

Assuming an earnings before income tax margin of 35%, Phillip Capital Research said: “This would imply an operating profit of RM67mil from 2025 to 2029, representing 13% of our 2025 forecast.

“With this contract win, Dayang’s total outstanding order book is estimated to be RM2.2bil.”

Phillip Capital Research has maintained its earnings forecasts on Dayang with a “buy” call on the stock at a target price (TP) of RM4.50.

Hong Leong Investment Bank (HLIB) Research in a note to clients said it expects Dayang to secure at least one of the two lumpy packages in Sarawak, in addition to one or two smaller packages to sustain its revenue run rate from the previous MCM-HUC campaign period (2018 to 2023).

“This is because Dayang is the incumbent of this package under the previous campaign period and as such, we view this package win as a continuation of its current job scope for SSB and SSPC,” it noted.

However, HLIB Research said it understands that the rates have improved slightly, which should lift its project margin.

“We believe the package should command a project margin of at least 30%,” it added.

HLIB Research has kept a “buy” call on Dayang with a TP of RM3.22.

“We continue to like Dayang, as we anticipate their financial year 2025 (FY25) earnings to remain largely stable due to solid MCM order pipeline and resilient offshore service vessels (OSV) demand,” it added.

Kenanga Research describes Dayang’s new contract win as within expectations, representing a single package estimated at RM1bil over the five-year firm period.

“Assuming a net margin of 20% (which is conservative compared to the company’s usual guidance due to higher interest from other contract bidders), the contract could contribute approximately RM40mil in profit after tax annually,” it said.

The research house also expects the group’s margins to remain resilient in FY25, supported by its existing higher-margin order book and improving trends in its OSV segment.

That aside, Kenanga Research believes that Dayang could still potentially win more packages from Petroliam Nasional Bhd (PETRONAS) for the Pan Malaysia contracts.

On Dayang’s outlook, with an order book valued at RM1.4bil, the group has more than sufficient runway to sustain its topside maintenance work orders in FY24.

Kenanga Research also believes the next round of umbrella contracts could be awarded by the end of FY24, and if not, Dayang is likely to secure extensions for its maintenance works due to the expected high demand.

The research house, which has a TP of RM3.80 on the stock, said: “We like Dayang due to sustained ramp-up in upstream maintenance activities as well as the anticipated expansion in project margins due to better contract terms secured.”

In addition, the group’s net cash balance sheet has allowed more potential expansions and its marine division is set to benefit from the boom in the OSV upcycle.

Meanwhile, CIMB Research said the latest contract win came as no surprise as the current umbrella contract for MCM-HUC services is set to conclude by the end of 2024.

“Our channel checks indicate that, among listed companies, four MCM and HUC packages have been awarded to date as part of PETRONAS’ MCM initiatives by PETRONAS, SSB and SSPC, including the package awarded to Dayang,” the research house noted.

CIMB Research has kept its FY24 to FY26 earnings projections unchanged until the MCM-HUC awards are finalised.

The research house also has a “buy” call with an unchanged TP of RM4.30 for Dayang.

   

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