DAYANG – Fundamental Analysis (14 Sep 2014)

DAYANG Analysis:-

Excel – http://1drv.ms/YUy9oC

My View:-

– Fair value:
  – Absolute EY%:
    – Trailing:
      – FY13 (EPS: 0.146) – Fair value 3.24 (Fair Value Uncertainty: HIGH)
      – R4Q (EPS: 0.174) – Fair value 3.85 (Fair Value Uncertainty: HIGH)
    – Forward:
      – FY14 (EPS: 0.252) – Fair value 5.58 (Fair Value Uncertainty: LOW)
      – FY15 (EPS: 0.284) – Fair value 6.29 (Fair Value Uncertainty: LOW)
    – EPS applied to reach the current stock price (3.5): 0.158
– Dayang’s current orderbook is RM4.7b, lasting through to 2018. The company’s tenderbook is approximately RM1b. Base on its historical tender success rate of 40-50%, new order replenishment of RM400-500m is expected by the end of this year. The bulk of the new jobs could be engineering, procurement, construction and commissioning (EPCC) of offshore structures. There could potentially be another RM3-4b worth of local offshore EPCC jobs up for grabs in the next 2-3 years. It is also a beneficiary of any improvements in associate PERDANA earnings.
– Market speculations on Perdana Petroleum. Apart from utilising the private placement funds for its foray into the EPCC segment and for the Pan Malaysia HUC jobs, there are market speculations that Dayang is interested to increase its stake in its associate company, Perdana Petroleum. We believe that this market speculation might hold some truths in it. Our view is that Perdana Petroleum could potentially be dropped from the Securities Commission Shariah-compliant list as the company has a gross debt level of approximately RM594m, out of which, RM533m is in USD denominated debts. As such, Lembaga Tabung Haji which owns a direct and indirect stake of 8.43% (62.2m units) and 0.21% (1.56m units) respectively might be forced to dispose all of its shareholdings in the company. Since Dayang already has a 24.5% strategic stake in Perdana Petroleum, there is a possibility of the company taking up all of Lembaga Tabung Haji’s stake, which at current price level is worth a total RM113m. However, this could then trigger a general offer, which would require Dayang to acquire Perdana’s remaining shares worth an approximate RM870m. This could be done via bank borrowings and share swap.
– I am generally positive on the current developments and progress of Dayang’s HUC projects. In addition, the company is venturing into the EPCC segment of the value chain. Given the company’s history and reputation of being a conservative and risk-averse company, the EPCC venture will bear fruit in the medium to long term.
– DAYANG is currently undervalued. I am seriously considering to buy DAYANG, but I already have quite a few O&G counters in my portfolio. Thinking.…….

Latest Financial – Q2 2014 Financial Report (22 Aug 2014) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1717757

At the time of writing, I did not own shares of DAYANG.

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