􀂃 Sarawak-based Dayang offers direct exposure to lucrative brownfield oil & gas activities and marine charters services in East Malaysia.

􀂃 Dayang should deliver a 27% EPS CAGR in FY08-09, riding on its RM627m orderbook and marine contracts, with upside potential if it develops its marine assets and/or takes the M&A route.

􀂃 Dayang’s 11x FY09 EPS, based on its RM1.45 IPO price, is higher than closest peer Petra Energy’s 7x and small-cap’s 8x average, but its share price may open higher, riding on its major shareholders’ clout.

Direct proxy to East Malaysia’s oil & gas play. Sarawak-based Dayang Enterprise Holdings, 74% owned by Naim Cendera (NCH MK; Not Rated) (34%) and its promoters - Harry Bujang (16%), Tengku Yusof (15%) and Ling Suk Kiong (10%), offers direct exposure to the rewarding brownfield oil & gas segment and marine chartering services in East Malaysia. Offshore topside maintenance and marine vessel chartering are Dayang’s core businesses (accounting for 98% of gross profit in FY07), while minor fabrication, and hookup and commissioning works play complementary roles.

Orders are Sabah-Sarawak centric. Not surprisingly, its RM627m brownfield oil & gas contracts, stretching into 2012 (see table overleaf), are for Sarawak and Sabah fields. Petronas Carigali (PCSB) is its largest customer to-date, accounting for 48% of total orders. Dayang’s tenders for new contracts worth RM600m are a testament to increasing brownfield activities in Malaysia, as the
country seeks to optimize production from the existing oil platforms.

27% EPS CAGR in FY08-09. Dayang is financially healthy, cash-rich and has consistently generated decent EBIT margins and teen ROEs. Dayang should deliver 27% EPS growth p.a. in FY08-09, riding on its existing RM627m orderbook and marine contracts. There is further room for growth as Dayang will take delivery of a new workboat/barge by end-08, and as new contracts are
awarded (not incorporated into forecasts). We are also not ruling out Dayang eyeing the M&A route for inorganic growth and/or growing its marine fleet as Dayang, with its light financials, has the capacity to gear up. On the flip side, we are concerned that superior 30% pretax margin (2x of Petra Energy’s) may be under pressure due to higher operating expenses (i.e. wages, steel, etc).

Not Rated; greater values lie elsewhere. Dayang’s 11x FY09 EPS, based on its RM1.45 IPO price, is above closest peer Petra Energy’s 7x and small-caps’ 8x average, but its share price may find support from its shareholders’ clout.