• Dayang announced that it has secured a new 5+3+2 years MCM and HUC service contract Package B4 from Shell effective 14th Oct 2024.

• While it is widely expected, we are still positive as it will replenish its orderbook that has fallen to RM1.4bn (as of 2Q24).

• No changes to our earnings forecast as we already anticipate the company to secure the contract.

• The stock price has fallen from the recent peak of RM3.09 to hit our TP of RM2.25. Thus, we upgrade Dayang to a HOLD (from a SELL). Our TP implies 8x FY25F P/E.

Secured a New Contract

Dayang announced that it has secured a contract from Sarawak Shell Bhd/Sabah Shell Petroleum Co. (Shell) for the provision of PanMalaysia Maintenance, Construction, Modification (MCM) and Hookup & Commissioning (HUC) Services for Package B4. The contract duration is 5 years with a 3+2 years extension option effective from 14th Oct 2024.

Our View

We are not surprised with this contract award as mentioned in our sector update report published recently. There is no contract value disclosed in the announcement as the contract is based on work orders issued by Shell throughout the contract duration. However, based on our channel check, the contract value could indicatively be worth RM1bn over the next 5 years. Accordingly, we estimate that this will boost its orderbook by 71% to RM2.4bn which is c.53% of the peak orderbook recorded in 4Q19 at RM4.5bn (refer to Chart 1). Separately, Carimin Petroleum has emerged as the winner for similar MCM and HUC services for Package B5 from Shell. Meanwhile, Deleum was awarded 2 MCM contracts by Petronas Carigali for Package A1 (Peninsular Malaysia – Oil) and Package A4 (Sarawak - Gas).

Earnings Forecast

No change to our earnings forecast as we deem this contract as within our assumption. We expect the company to announce more contract in near future as there are another 12 MCM packages outstanding.

Upgrade to a HOLD with similar TP of RM2.25

We upgrade Dayang to a HOLD with an unchanged DCF-derived TP of RM2.25. This implies 8x FY25F P/E.

Source: BIMB Securities Research - 5 Nov 2024