• Dayang has secured package B4 for the provision of MCM works for Sarawak Shell and Sabah Shell Petroleum Co
   
• The contract has a duration of 5+3+2 years, with an estimated value of RM1bn
   
• Maintain BUY rating with RM4.50 target price. We expect more positive contract flows from MCM packages award

Secured MCM Package From Sarawak Shell and Sabah Shell

Dayang announced that its wholly-owned subsidiary, Dayang Enterprise Sdn Bhd has secured a Maintenance, Construction, Modification (MCM) and Hook-Up Commissioning (HUC) services contract for Package B4 from Sarawak Shell Berhad and Sabah Shell Petroleum Co. The contract duration is for 5 years, with the option to extend for an additional 3+2 years, effective from 14 Oct 24.

More Packages Up for Grabs

This contract marks Dayang’s first package win out of the 18 available Pan Malaysia packages, 15 of which are MCM, with the remaining 3 being HUC packages. We estimate this contract to be relatively larger than the rest at c.RM1bn, translating to annual RM200m revenue over the next 5 firm years. The overall contract value for this round of MCM packages is lower due to the exclusion of vessel chartering. However, service rates are estimated to be 20–25% higher than the previous MCM contracts in 2017, which is positive. Assuming an EBIT margin of 35%, this would imply an operating profit of RM67m from 2025–29, representing 13% of our 2025E forecast. With this contract win, Dayang’s total outstanding order book is estimated to be RM2.2bn. We expect more positive contract news flow on additional package awards, potentially benefiting Dayang, being a market leader and incumbent in the HUC/MCM segment.

Reiterate BUY With RM4.50 Target Price

We maintain our earnings forecast, as this contract win falls under our order book replenishment assumptions. Dayang is trading at an attractive 8x 2025 PE, supported by its sizable order book and attractive earnings growth prospects. We reiterate our BUY rating and RM4.50 target price based on an unchanged 16x PE multiple on 2025E EPS. Key risks to our BUY call include unforeseen delays in work orders, contract awards, and higher-thanexpected operating costs

Source: Phillip Capital Research - 6 Nov 2024