KUCHING: Dayang Holdings Enterprise Bhd (Dayang) has announced it is proposing a one-for-two bonus issue which could result in up to 275 million new shares being issued, of which analysts were positive on as the exercise will improve the trading liquidity of the stock.
In its announcement to Bursa Malaysia, Dayang’s aim for the proposed bonus issue is to reward the existing shareholders for their loyalty and continuous support, and improve the liquidity and affordability of the shares. It expects the proposed exercise to be completed in the first quarter of 2014 (1Q14).
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), “Assuming a maximum scenario of new 275 million shares issued, Dayang’s share base will increase by 50 per cent to 825 million shares.”
Regarding the company’s outlook, the research arm further pointed out that Dayang’s longer-term prospects are strong given that circa 77 per cent of its orderbook (RM4 billion) extends to 2018.
“Any improvement in Perdana Petroleum Bhd’s earnings will have a positive bottom-line impact on Dayang through associate earnings contributions,” it opined.
In addition, any margin expansion for its new projects, with the research arm having assumed a discount to its historical earnings before interests and taxes margins earned on its previous topside maintenance projects, will also provide a further catalyst to Dayang’s earnings.
Overall, no changes were made to the forecast as the bonus issue has no impact on the research arm’s forecasts.
As such, Kenanga Research maintained its ‘outperform’ rating on the stock and kept its target price unchanged at RM6.15 per share, based on financial year 2014 (FY14) 15-fold price earnings ratio (PER).
It did, however, take note of the risks Dayang faces including a downturn in the oil and gas sector that could result in delays in contract rollouts.