News

• Dayang has proposed to distribute up to 292.2m Perdana shares, representing 37.5% equity interest in Perdana, by way of dividend-in-specie to Dayang shareholders.
• Upon completion, Dayang’s shareholding in Perdana will reduce to circa 60.5%.
• Price of Perdana is not fixed at this juncture but Dayang’s cost of investment during its MGO for Perdana is at RM1.55/share. Financial Impact
• A big positive for the company as the successful refloating of Perdana’s shares would provide another avenue for equity capital raising.
• Based on RM1.55/share assumption, Dayang’s shareholder would receive RM0.51/share worth of Perdana’s shares , representing 41.7% yield.
• However, we believe the yield would not be a realistic assumption for investors as the MGO price is, in our opinion, valued Perdana at huge premium given that the offer was made before oil prices crashed in 2016.
• Using our fair value for Perdana at RM370.8m for 98% stake in our SOP, the implied dividend per share (in the form of Perdana’s shares) for Dayang shareholders would be RM0.14/share, which also yields a decent 11%.
• Our assumption for Perdana’s valuation is conservative at 0.5x P/BV. At our valuation assumption, Perdana’s share price will plunge 72% post relisting of shares in the market.
• Impact on earnings from the exercise would be minimal to Dayang as we have forecasted RM6m EBIT (for 98% stake) for both FY17 and FY18 (4% and 3% of Dayang’s EBIT for FY17 and FY18 respectively).

Forecast

• Maintained

Rating

BUY (↔)

• The announced dividend-in-specie would better reflect the value of its stake in Perdana. In 2017, HUC activities are expected to pick up and its bread and butter HUC and topside maintenance business would register stronger earnings. The group is also a strong favourite to get a share of the pie from the upcoming MCM and Pan Malaysia HUC contract packages.

Valuation

• TP is maintained at RM1.42 based on our SoP-driven valuation.

Source: Hong Leong Investment Bank Research - 15 May 2017