DAYANG ENTERPRISE HOLDING BHD

Competitors

Directly taken from the 2018 Annual Report with appropriate amendment:

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This write-up contains some forward-looking statements in respect to the Dayang Group’s financial condition, results of operations and business. These forward-looking statements represent Dayang Group’s expectations or beliefs concerning future events and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements.

Readers are hereby cautioned that a number of factors could cause actual results to differ, in some instances materially, from those anticipated or implied in any forward-looking statement. In this respect readers must therefore not rely solely on these statements in making investment decisions regarding the Dayang Group. The writer shall not be responsible for any investment decisions made by the readers in reliance on those forward-looking statements.

Forward-looking statements speak only as of the date they are made, and it should not be assumed that they have been reviewed or updated in the light of new information or future events that would arise in the interim of the publication of this write-up and the time of reading this write-up.

The following questions (from Jon) really got me thinking: -

• who are the competitors
• What is their edge
• Barriers of entry
• Cost base and competence comparison
• Value of services provided compared against competitors

Competitors

It is sort of second nature, that, Dayang to me, is miles ahead of the pack, but, there is no real hard facts to back that “feel”. Daniel Kahneman would say that is System 1 thinking.

The services provided by Dayang is maintenance (top-side, i.e. above water). This will involve in brief; engineering, procurement, fabrication, installation and commissioning. In short – EPIC + fabrication and for “brown” fields – that is existing platform. Others in this field will be Carimin, Petra, T7, Transfame and many more. Only companies (with vessels) that have won MCM tenders are considered.

Edge & Barrier to entry

Now the part EP + fabrication is onshore – performed on land, while installation and commissioning are done offshore, that is on the sea. Therefore, ownership of AWB, is important. Obviously, owning and having access to such vessels is an added edge while tendering, because cost is known and within influence.

Sure, there are a lot of companies with offshore vessels. So companies without AWB can still compete by tieing up with one of these vessels owners. Transfame is one such company that managed to secure MCM contract from Shell. However it is not listed.

Remember these (MCM) contracts are all on call-out basis – that is, there is no firm work. So, there is a lot of commitment (on the part of Transfame) to ensure vessel is available before a WO is issued. 

Finally, clients are oil (and gas) production companies – they like certainty. They like deep experience. They like performance – that is, can deliver!

The facts that Dayang won the majority of the MCM contracts already speak volume of their cost, competence and value of services provided.

A simple qualitative analysis is done: -

Of course, this is not perfect, but better than none. One can muck around with the scores. The previous 5 years, Dayang performed the higher amount of work RM 3.8B compared to the other two.

Petra got the smallest of the current 5 years MCM contracts.

Both Dayang and Petra have 7 AWB but why Dayang got that many more contracts than Petra? I have no idea.

Perdana used to be part of Petra before Dayang became its major shareholder.

There are the upcoming HUC contracts – intense negotiation going on, I am sure. But odds on Dayang to win one or two as they have Perdana to provide the necessary AWB.

Dayang at the end of the day is leader of the pack.

Petronas Activity Outlook should also provide comfort that there will be plenty of Work Orders for these 3 years - 2019, 2020 & 2021.