KUCHING: Dayang Enterprise Holdings Bhd (Dayang) has been listed as RHB Investment Bank Bhd’s (RHB Investment) top Malaysian small cap companies in its ‘20 Jewels – 2018 Edition’ report as it views the group as poised to benefit from stronger demand for maintenance services from Petronas and other production sharing contracts (PSCs).
RHB Research Institute Sdn Bhd (RHB Research) said, “We like the group due to its experience in the upstream maintenance services segment, which is poised to benefit from stronger indication of demand for maintenance services from Petronas and other PSCs.”
It further explained, “Its business model of bundling offshore support vessel (OSV) assets with its bread and butter HUC and topside maintenance capabilities has also showcased its ability to execute on major contracts at short notice.
“This should increase its chances of getting more works for the Pan Malaysia umbrella maintenance contracts from other PSCs.”
Aside from that, it highlighted that the group has more than 10 years’ of experience in the upstream maintenance space.
“In a lower-margin environment for contractors, Dayang’s experience should help the group stay profitable with Petronas’ maintenance, construction and modification (MCM) contract.
“The group could also benefit from spillover effects from inexperienced players, which many not be able to execute their contracts. Note that the total value awarded for the MCM contract from Petronas is believed to be circa RM4 billion,” the research team added.
Meanwhile, it noted that Dayang is a beneficiary of uptick in maintenance contract awards. It pointed out that the group has secured a RM1.1 billion Petronas MCM contract for five years.
“While its outstanding HUC and topside maintenance activities have slowed over the past two years – due to the slump in oil prices – it is expected to ramp up in 2018.
“In addition, the umbrella MCM contract for the rest of the PSCs has yet to be awarded, and more contract awards should benefit Dayang directly, in our view,” RHB Research opined.