Dayang’s FY11 results were below expectations, attributed to
the slowing in activities owing to the
monsoon season, some demobilization and mobilization costs in relation
to new contracts, as well as the carrying out of lower margin work during the quarter. We are
downgrading our FY12 earnings by 13%. Maintain Buy, but with a lower Fair Value
of RM2.34.
Below estimates.
Dayang’s FY11 results were within consensus but below our expectations, making
up 98% and 86% of the FY11 forecasts. In
3QFY11, we had upgraded our FY11 forecasts on expectations of more positive
surprises coming from the delivery or
performance of higher margin
products and services but we gather that
apparently, most of the company’s customers had wound down their activities
faster-than expected to prepare for the monsoon season. Meanwhile,
we understand that it performed
lower margin work orders during the quarter and was also affected by some demobilization as well
as new mobilization costs in anticipation of new contracts. These caused its
4QFY11 revenue and EBIT to drop by 2.0% and 57.4% q-o-q.to RM99.1m and RM16.6m respectively.
Nevertheless, YTD FY11 revenue
and EBIT surged 49.7% and 31.5% to
RM382.3m and RM111.8m
respectively, contributed by the
higher number of brownfield services
delivered in FY11 as Petronas and its PSC contractors became more active in
local O&G developments compared with the previous year.
Buying more of
Perdana Petroleum? Given that Dayang had net cash of RM136.2m as at Dec
2011, we would not be surprised if it decides to increase its current equity
stake of more than 11% in Perdana. However, we believe that management would
only do so after Perdana has rolled
out its turnaround plan to ensure that there would be no erosion
in earnings for Dayang once it is bought up to the associate level.
Although we are unsure of the timeline, we believe Perdana would be able to
come up
with a turnaround plan quickly,
and we would not be surprised if Perdana becomes Dayang’s associate.
Downgrading FY12
earnings forecast by 13%. As FY12
will be a year during which Dayang will be bidding for
projects, we our downgrading our FY12
earnings to factor in further demobilization costs of completed projects
and the mobilization costs incurred in respect
of new projects.
Maintain Buy.
Nevertheless, we are tweaking down our fair value for Dayang to RM2.34 (previously
RM2.70) based on the existing PER of 13x FY12 EPS. Despite our downgrade,
we still like Dayang’s strong
orderbook of over RM1.5bn, which
will keep it busy over the next 2-3
years. Also, the company’s steady business model provides it with recurring
income and a constant cash flow.
Source: OSK188
No comments:
Post a Comment