Friday, February 11, 2011

HDBSVR raises Dayang target price to RM2.70 per share from RM2.20 after RM802m contract

KUALA LUMPUR: Hwang DBS Vickers Research has raised the target price for Dayang Enterprise Bhd to RM2.70 per share (previously RM2.20 ex-bonus and rights) based on 15.5 times FY11F EPS.

'Our PE multiple is based on valuations for comparable size peers, excluding larger caps that are trading at large premiums to the sector,' it said on Friday, Feb 11.

Dayang had on Thursday announced it has secured the RM802 million five-year TSM contract from Petronas Carigali.

'The contract win was within our expectation - we had said Dayang was in a strong position to secure it given it is the incumbent operator. The contract would be on a 'call-up' basis, and we believe the overall contract value is likely to be higher than the original value because there is almost always additional work required,' it said.

HDBSVR said the latest win puts Dayang's order book at RM1.8 billion, giving five years of earnings visibility. The contract win reaffirmed its view that Dayang will be one of the companies with the strongest earnings growth in the oil & gas space.

The research house said the order book was also in line with its RM1.0 billion contract win estimate for 2011, and hence, it is retaining its forecast.

'We expect sustainable c.24% EBIT margin from the contract on the back of quality asset ownership,' said HDBSVR.

'Valuation undemanding, maintain Buy. Dayang is still trading at attractive 13x FY11F PE against the sector's 17x, despite stronger earnings growth of 46.2% CAGR over FY09-11F on superior margins against 13.5% growth for the sector,' it said.

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