Dayang Enterprise Holdings Bhd (Dayang) is a strong contender for the soon-to-be awarded Pan Malaysia Hook-Up and Commissioning (HUC) tender worth between RM8 to RM10 billion, RHB Investment Bank said in a research report.
Following an internal coverage revamp, the investment bank said it was revisiting its financial model and expected RM400 million in annual order book replenishment for Dayang Enterprise, which provides offshore maintenance services, minor fabrication and offshore hook-up and commissioning services.
The Pan Malaysia HUC tender comprises the multi-year umbrella transport and installation contract covering oil and gas development throughout Malaysia.
Dayang’s existing RM1.2 billion strong order book was stretching up to 2017 and this reinforces the investment bank’s conviction for the stock.
“We believe that the company could potentially secure at least RM2 billion worth of jobs which will translate into an annual orderbook replenishment of RM400 million, moving forward,” it said.
The report said that a higher than expected order win could prompt a further re-rating, given the long-term tenure of the contract.
“This will boost Dayang Enterprise’s earnings visibility and we estimate that every additional RM100 million in contract value won per annum would lift our financial year 2014 earnings estimate by 14.3 per cent,” the report said.
Given that Dayang had the option to charter vessels from its associate company, Perdana Petroleum, the report said the group would have the capacity to accept the anticipated contract should it secure the tender.
Dayang was sitting on a solid balance sheet with net cash totalling RM86.1 million.
Since 2010, the company has been consistently paying out more that 50 per cent in terms of dividends from its total earnings.
Assuming a dividend payout of 50 per cent, investors could look forward to dividend yields of 3.2 per cent for the current financial year and 4.2 per cent for next year, the report said. — Bernama