Dayang sets eyes on more O&G sector jobs

Dayang Enterprise Holdings Bhd (Dayang) is preparing to handle more jobs especially with a major portion of them to be derived from engineering, procurement, construction and commissioning (EPCC) of offshore structures in the oil and gas (O&G) industry.

The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) said the company is poised to enter its next stage of growth following its recent fund raising activities through private placement.

The research firm said the company is expected to raise between RM280 million to RM300 million from private placement.

It explained that Dayang could use the cash raised for the chartering of third party vessels and for operational expenses.

Additionally, MIDF Research observed that the company could expand its fleet of vessel to meet the demand of future hook-up commissioning ( HUC) works and the potential jobs from EPCC ventures.

It observed that the O&G company has invested RM15 million to purchase a new fabrication yard in Labuan and is planning to invest more money for fabrication yard equipments.

With an estimate amount of RM280 million to RM300 million to be raised from private placement, MIDF Research forecasted that the money is sufficient to acquire four to five more vessels.

On prospects for EPCC jobs, the research firm noted that there could approximately RM3 billion to RM4 billion worth of new contracts to be tendered out in the next two to three years.

Apart from using the money raised for future EPCC contracts, MIDF Research believed that Dayang could also use some of the funds to increase its stake in its associate company Perdana Petroleum Bhd (Perdana Petroleum).

The research firm opined that as Perdana Petroleum could potentially be dropped from the Shariah-compliant list for investment in which pilgrim fund, Lembaga Tabung Haji has a substantial stakes in it, Dayang could use the money raised to raise its stakes in Perdana Petroleum.

In the meantime, MIDF Research is optimistic on Dayang’s current development and progress for the company’s HUC projects.

The research firm noted that since the O&G company undertook the Pan Malaysian HUC jobs worth a collective RM4 billion in May last year, the company’s cash level has decreased slightly to RM79.8 million as at end of June from RM96 million as at June 2013.

Thus, MIDF Research believes that the private placement exercise was conducted to boost the company’s f inancial position and for working capital and operational purposes.

Furthermore, the research firm observed that with Dayang’s HUC work progressing well, it projected that the company’s earnings for the third quarter of 2014 (3Q14) to be better than in 2Q14.

The research firm also forecasted that the oil and gas company’s 2014 full year f inancial performance to outpace that of financial year 2013.

Moreover, MIDF Research pointed out that Dayang expects to sustain its jobflow momentum into 2015.

The research firm noted Dayang’s tender book remains strong with approximately RM1 billion worth of new jobs that the company is bidding for.

Besides that, MIDF Research noted Dayang’s current outstanding orderbook could sustain the company’s earnings through to 2018.

Hence, MIDF Research is positive on Dayang’s latest fund raising activity as a preparation for better times ahead to enhance its earnings.