May 24, 2010

DAYANG - opportunity to buy

Dayang Enterprises  (RM1.80) Buy Target Price:RM2.80 Recent share price weakness as a good opportunity to buy Dayang.

Petronas HUC jobs come through
•  News
Last Friday, Dayang announced that they had been awarded a contract by Petronas Carigali Sdn Bhd for the provision of hook up and commissioning (“HUC”) of Petronas Carigali's facilities from 2010 to 2012.
Under this contract, DESB received three work orders for an estimated value of RM150.87m to be completed within six to twelve months which are (1) HUC of Resak Host Tie-In for Tangga Barat Development Project, (2) HUC for Duyong Revisit IV Project, and (3) provision of interim topside major maintenance Services for Petronas Carigali Sdn Bhd. (Bursa)

•  Comments
This HUC job has been much talked about by the market in recent months and we are naturally pleased with the award finally coming into fruition for Dayang. With this additional RM151m, we estimate their current orderbook to exceed RM1bn, a historical high for the group.

In terms of margin expectations for this job, we view that 15-20% at EBIT level is reasonable to expect as it would be similar to other HUC jobs the company has undertaken previously. Again, we are not changing our estimates at this juncture as the RM151m makes up part of our contract replenishment assumptions for FY10 and FY11 of RM250m and RM300m respectively. 

We view recent share price weakness as a good opportunity to buy into Dayang. Our target price of RM2.80 remains for now. This is based on a 15x PE pegging FY10 estimates. To note, the group will release their 1QFY10 results on the 26 May.

dayang-financial-analysis

by ECMLibra