Analysts said the latest contract wins were not only crucial in replenishing Dayang’s order book, but also enhance earnings visibility.
PETALING JAYA: Dayang Enterprise Holdings Bhd
’s earnings growth is expected to remain resilient in the year ahead, underpinned by a solid maintenance, construction and modification (MCM) order pipeline and healthy offshore support vessel (OSV) demand.
The oil and gas services company recently announced it had secured another two Pan Malaysia offshore MCM and hook-up commissioning (HUC) contracts for Package A3 (Sarawak Asset) and Package A5 (Sabah Asset) from PETRONAS Carigali Sdn Bhd.
These contracts are set for a five-year period, with three plus two years of extension option.
Analysts are positive with the latest contract wins, stating that these jobs were not only crucial in replenishing Dayang’s order book, but also enhance earnings visibility.
Given the positive take, most analysts continue to recommend a “buy” or “outperform” call on Dayang’s shares.
Hong Leong Investment Bank (HLIB) Research kept its target price for Dayang at RM3.22 based on a price-earnings (P/E) multiple of 12 times mid-2025 estimated earnings.
“We continue to like Dayang, as we anticipate its 2025 earnings to remain largely stable due to a solid MCM order pipeline and resilient OSV demand.
“As a Sarawak-based contractor, Dayang is also poised to be a beneficiary of Petroleum Sarawak Bhd’s offshore capital expenditure drive,” the brokerage wrote in its report.
It noted that following last week’s announcement of Package B4 (RM1bil) from Shell Sarawak & Sabah, Dayang has now collectively secured a total of three packages under the Pan Malaysia MCM-HUC tender.
“We view these project wins positively as they are crucial in replenishing Dayang’s order book to sustain the group’s revenue for the next few years.
“The three packages secured from the Pan Malaysia MCM-HUC tender collectively amount to about RM4bil,” HLIB Research explained.
“In addition to Dayang’s outstanding order book of RM1.4bil as at June 2024, we expect Dayang’s earnings to remain resilient.
“However, we note that further earnings upside from its current level will hinge on the outcome and timing of the three major decommissioning packages from PETRONAS (total of more than RM2bil) that are up for grabs in 2025,” it noted.
CIMB Research said the latest two MCM and HUC contracts would ensure sustained earnings for Dayang for at least the next five years.
“Our calculation suggests that these two MCM and HUC contracts could generate around RM600mil per annum in revenue contribution to Dayang over 2025 to 2029, based on the combined value of RM3bil.
“Assuming a profit margin of 20%, the two contracts are expected to contribute around RM120mil annually to the company’s core net profit during this time frame,” the brokerage stated.
CIMB Research maintained its target price for Dayang at RM4.30 based on 16 times 2025 P/E.
It noted that the latest job awards underscored Dayang’s robust capabilities as a brownfield specialist and its proven track record in the maintenance sector.
“The lack of a requirement for bidders to provide their own vessels attracted more participants to the bid round, yet Dayang still stood out, demonstrating its competitive edge in a tough bidding environment,” it said.
Kenanga Research said that with an order book of RM5.2bil, Dayang had more than sufficient runway to sustain its topside maintenance work orders in 2024, which will also mark the tail-end of the yearly extension of its previous umbrella topside maintenance and HUC contracts from PETRONAS and other clients.
“We believe that the next round of umbrella contracts could be awarded by the end of 2024, and if not, Dayang is likely to secure extensions for its maintenance works due to the expected high demand,” the brokerage said.
Kenanga Research maintained its target price for Dayang at RM3.80 pegged to an unchanged 13 times 2025 P/E.
Meanwhile, Phillip Capital Research noted that Dayang’s latest contract wins fall under its order book replenishment assumptions. Inclusive of Package B4, they represented 71% of the brokerage’s 2025 order book replenishment.
“Dayang is trading at an attractive eight times 2025 P/E, supported by its sizable order book and attractive earnings growth prospects,” the brokerage said.
Its target price for the counter stood at RM4.50 based on an unchanged 16 times 2025 P/E.
