M&A Securities Results Review (1Q16) PP14767/9/212(3761) Dayang Enterprise Holdings Bhd Thursday, May 26, 216 HOLD (TP: RM1.16) Results Review A Quiet Quarter Current Price (RM) New Target Price (RM) Previous Target Price (RM) Previous Recommend. RM1.6 RM1.16 RM1.26 HOLD Actual vs. expectations. Dayang Enterprise Holdings Bhd (Dayang) posted a net loss of RM26 million in 1Q16 Upside To Target Price 9% Dividend Yield (FY17) 3% vs. 1Q15 net profit of RM34 million which came in below ours and consensus estimates respectively. Disappointing 1Q16 numbers were hammered by Stock Code Bloomberg DEHB MK weaker EBIT contribution from offshore TMS segment (- 96% y-o-y) added with higher finance cost of RM26 million recorded in 1Q16 (1Q15: RM2 million) due to the increase in Dayang s total borrowing amount to RM1.7 billion (1Q15: RM144 million). Stock & Market Data Listing Sector Shariah Compliance MAIN MARKET Oil and Gas Yes Issued Shares (mn) 877 Dividend. No dividend was declared during the quarter. Market Cap (RM mn) 1,69 YTD Chg In Share Price -13% Beta (x) 1.84 Top line vs bottom line. Dayang s FY15 revenue was down to RM112 million (-41% y-o-y) mainly impacted by lower contribution from the Offshore TMS segment 52-week Hi/Lo (RM) 2.77.99 3M Average Volume (shrs) 2.97mn Estimated Free Float 23% which posted a weaker revenue of RM86 million (-54% y-o-y) due to lower work order value performed during the period. Similarly, Dayang s 1Q16 EBIT also slipped Major Shareholders Naim Holdings 29% KWAP 1% by 97% y-o-y to RM1 million impacted by lower earnings LTH 9% contribution the offshore TMS segment (-96% y-o-y) in tandem with the decline in revenue as mentioned above. Orderbook at RM3.8 billion. We remain upbeat on Dayang s long-term outlook driven by the group s sizeable order book of approximately RM3.6 billion as at March 216 which is expected to last them until FY18. Note that majority of its orderbook is derived from three HUC job secured in May 213. Recall that Dayang has won a new contract worth RM25 million in June 215 awarded by Petronas Carigali for the provision of facilities improvement project (FIP) for Petronas Carigali Package A: Sarawak Operations (SKO) and Sabah Operations (SBO) Offshore as well as a 1
small contract awarded by Kebabangan Petroleum Operating Company (KPOC) in April 216 worth between RM25-RM42 million for the provision of topside maintenance service. The group outstanding tender book stood at approximately RM35 million as at March 216. Takeover of Perdana. We are positive on its latest takeover of Perdana Petroleum which would further strengthen Dayang s business expansion especially on the hook-up and commissioning (HUCC) services by leveraging on Perdana s expertise as a marine player with fleet size of 17 vessels (8 Anchor Handling Tug & Supply (AHTS), 7 Work Barge and 2 Work Boat). Furthermore, it would be a strong selling point for Dayang in bidding for new tenders. Change to forecast. We have done some housekeeping exercise and came out with new FY16 and FY17 earnings forecast of RM93 million (-46% y-o-y) and RM13 million (+4% y-o-y) respectively. We expect the group to face a challenging period in FY16 on weaker-than-expected work orders for HUC jobs in line with the softening in oil prices but FY17 earnings are expected to stabilize as we factor in a higher contract wins added with the expected rebound in oil price movement. Nonetheless, there is a stress point for Dayang following Petronas decision to cut capex by RM15 billion in 216. This, like it or not, may affect marine players as re-negotiation of contract could be on the plate. Valuation & recommendation. We re-value Dayang at RM1.16 based on 7.7x PER (3% discount to average 3-year low PER of 11x) pegged to FY17 EPS of 15sen and the stock is a HOLD underpinned by i) slower-than-expected orderbook replenishment and ii) weaker HUC s margin. Company FYE Price (RM) Table 1: Peers Comparison (Calenderised) EPS (sen) P/E (X) P/B (X) FY16 FY17 FY16 FY17 FY16 FY17 SapuraKencana Jan 1.61 13 17 1.6 1.9.8.8 (7) 1 2.34 Buy Wah Seong Dec.71 8 9 9.6 8..5.5 1 4.8 Hold Bumi Armada Dec.71 5 8 14.4 9.3.6.6 (3) 2.95 Buy Dialog Group Jun 1.54 6 7 26.8 24.7 3.7 3.4 14 1 1.6 Hold MMHE Dec 1.17 5 5 2. 19.3.5.6 2 NA.88 Sell PetDag Dec 23.52 89 94 26.7 25.4 4.4 4.2 16 3 23.58 Hold Dayang Dec 1.6 14 18 8.6 6.9.9.8 NA 3 1.16 Hold UMW-OG Dec.89 (3) (1) NA NA.6.6 (11) NA.75 Sell Perisai Dec.25 1 24 2.8 1..4.3 2 NA NR NR Perdana Petroleum Dec NA 6 7 27.5 23.3 NA NA (3) NA NR NR TH Heavy Dec.1 NA NA NA NA NA NA (23) NA NR NR Petra Energy Dec 1.27 15 18 8.3 7..7.6 8 2 NR NR Deleum Dec 1.15 13 15 9.2 8. 1.5 1.4 16 5 NR NR Uzma Dec 1.88 2 23 8.9 7.6.9.8 2 NA NR NR KNM Dec.46 6 6 8.9 7.9.4.4 2 NA NR NR Average 15.4 12.3 1.2 1.1 1 2 Source: Bloomberg, M&A Securities ROE (%) DY (%) TP (RM) Call 2
Table 2: Financial Forecast YE: Dec (RM million) FY13 FY14 FY15 FY16F FY17F Revenue 553 877 779 1,68 1,19 Gross profit 23 3 339 352 393 EBITDA 158 227 252 189 216 EBIT 132 2 156 155 181 Net Finance cost () (4) (56) (39) (23) Share of profit from Associates 14 22 (6) PBT 175 218 22 116 158 Net profit 149 179 172 93 13 EPS (sen) 18 21 2 11 15 EBITDA margin 29% 26% 32% 18% 18% EBIT margin 24% 23% 2% 15% 15% PBT margin 32% 25% 26% 11% 13% Net profit margin 27% 2% 22% 9% 11% PER (x) 21.3 13.6 6.6 1. 7.2 P/BV (x) 4.8 2.5 1..9.8 Dividend (sen) 1 7 NA 3 3 Dividend yield 3% 2% NA 3% 3% Table 3: Results Analysis YE: Dec (RM million) 1Q15 4Q15 1Q16 q-o-q y-o-y 3M15 3M16 y-o-y Revenue 19 222 112-5% -41% 19 112-41% EBIT 44 34 1-96% -97% 44 1-97% Associates 2 NM NM 2 NM PBT 46 18 (23) -226% -15% 46 (23) -15% Taxation (11) (1) (4) 456% -64% (11) (4) -64% Net Profit 34 16 (26) -266% -177% 34 (26) -177% EPS (sen) 4 2 (3) -266% -177% 4 (3) -177% EBIT margin 23% 15% 1% 23% 1% PBT margin 24% 8% -2% 24% -2% Net profit margin 18% 7% -24% 18% -24% Effective tax rate 25% 4% -18% 25% -18% Table 4: Segmental Analysis YE: Dec (RM million) 1Q15 4Q15 1Q16 q-o-q y-o-y 3M15 3M16 y-o-y Revenue Investment Holding 32 1 1 % -96% 32 1-96% Offshore TMS 189 185 86-54% -54% 189 86-54% Marine Charter 17 68 54-2% 22% 17 54 22% Equipment Rental 8 8 8-1% -2% 8 8-2% Segment Profits Investment Holding 32 (3).8 NM -1% 32.8-1% Offshore TMS 4 51 1-97% -96% 4 1-96% Marine Charter (1) (44).3 NM NM (1).3 NM Equipment Rental 3 3 4 24% 22% 3 4 22% 3
Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 FY13 FY14 FY15 FY16F FY17F RM Points RM million Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 USD per barrel USD per barrel WTI vs. Brent Crude Oil Price (April 215-April 216) 7 8 6 7 5 4 3 2 1 6 5 4 3 2 1 WTI (LHS) Brent (RHS) Source: Bloomberg Dayang Share Price vs. KLCI (April 214-April 216) Revenue and Net Profit (FY13-FY17F) 4. 3.5 3. 2.5 2. 1.5 21 19 17 15 13 11 1,4 1,2 1, 8 6 553 877 779 1,68 1,19 1..5. 9 7 5 4 2 149 181 172 93 13 Dayang (LHS) KLCI (RHS) Revenue Net Profit Source: Bloomberg, M&A Securities 4
M&A Securities STOCK RECOMMENDATIONS BUY Share price is expected to be +1% over the next 12 months. TRADING BUY Share price is expected to be +1% within 3-months due to positive newsflow. HOLD Share price is expected to be between -1% and +1% over the next 12 months. SELL Share price is expected to be -1% over the next 12 months. SECTOR RECOMMENDATIONS OVERWEIGHT The sector is expected to outperform the FBM KLCI over the next 12 months. NEUTRAL The sector is expected to perform in line with the FBM KLCI over the next 12 months. UNDERWEIGHT The sector is expected to underperform the FBM KLCI over the next 12 months. DISCLOSURES AND DISCLAIMER This report has been prepared by M&A SECURITIES SDN BHD. Readers should be fully aware that this report is for informational purposes only and no representation or warranty, expressed or implied is made as to the accuracy, completeness or reliability of the information or opinion contained herein. The recommendation and opinion are based on information obtained or derived from sources believed to be reliable. This report contains financial forecast/projection based on our assumptions which may defer from the actual financial results announced by the companies under coverage. All opinions, estimates and assumptions are subject to change without notice. Analysts will initiate, update and cease coverage solely at the discretion of M&A SECURITIES SDN BHD. Investors are to be cautioned that value of any securities invested may fluctuate from time to time. We advise investors to seek financial, legal and other advice for investing based on the recommendation of our report as we have not taken into account each investors specific investment objectives, risk tolerance and financial position. This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. M&A SECURITIES SDN BHD can accept no liability for any consequential loss or damage whether direct or indirect. Investment should be made at investors own risks. M&A SECURITIES SDN BHD and INSAS GROUP of companies, their respective directors, officers, employees and connected parties may have interest in any of the securities mentioned and may benefit from the information herein. M&A SECURITIES SDN BHD and INSAS GROUP of companies and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. This report may not be reproduced, distributed or published in any form or for any purpose. M & A Securities Sdn Bhd (1517-H) (A wholly-owned subsidiary of INSAS BERHAD) A Participating Organisation of Bursa Malaysia Securities Berhad Principal Office: Level 1,2,3 No.45 & 47,43-6 The Boulevard, Mid Valley City, Lingkaran Syed Putra, 592 Kuala Lumpur Tel: +63 2282 182 Fax: +63 2283 1893 Website: www.mnaonline.com.my 5