Dayang Enterprise (Dayang) secures a contract for the provision of Pan Malaysia Maintenance, Construction, Modification (MCM) and Hook and Commissioning (HUC) services for Package B4 from Sarawak Shell Bhd (SSB) / Sabah Shell Petroleum Co. (SSPC) with a 5-year duration plus three- and two-years extension options (5+3+2). There is no contract value announced as it is based on call-out work order, however, we estimate the contract is approximately worth RM1.0bn for the first five years. This is the first MCM and HUC contract renewal as all existing contracts shall be expired by December 2024. We expect Dayang to secure at least another two contracts out of 18 packages available given its prominent track record in executing MCM and HUC work in the last two decades. We make no changes on our estimates as the contract is part of our replenishment. We maintain our Outperform call and TP of RM4.65.

• Replenishing orderbook. Dayang's existing orderbook of RM1.4bn is mainly consists of RM1.2bn Asset Integrity Findings (AIF), while the remaining is the expiring MCM and HUC contracts, which reaching tail-end by December 2024. Hence, the contract award is widely expected. We make no changes on our estimates as we already assumed the contract is part of the orderbook replenishment.
• To bag at least another two MCM and HUC contracts. Based on our understanding, the bidding process for this round is more competitive compared to previous round in 2018 due to the absence of the bidders' requirement to provide its own vessel to execute the MCM and HUC. Therefore, we expect fewer number of contracts to be secured compared to the previous round. Nevertheless, we expect Dayang to secure sizeable contracts, at least another two similar contracts due to its prominent track records, facility readiness, financial and manpower capacity to execute the larger packages. We are also not discounting Dayang to secure another Sarawak packages given its long history operation establishment in the state.
• Eyeing for decommissioning works. We gathered that PETRONAS is opening a bid round tender for decommissioning work packages which expected to be awarded in mid-2025/2026. The decommissioning works is estimated to have higher margin as it will require a specialised vessel and preferably to be executed during low activity season (monsoon). This would be another opportunity for Dayang to replenish its orderbook for its topside maintenance segment, other than MCM and HUC.

Source: PublicInvest Research - 5 Nov 2024