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Friday, June 10, 2011

DAYANG - A Steady O&G Service Provider (OSK)

Dayang is an established O&G service provider specializing in hook-up and commissioning as well as maintenance services. It has a RM1.6bn-strong orderbook, which is enough to keep the company busy over the next 2-3 years. We think the company’s next growth catalyst will be potential M&A deals. We like the company’s solid business model, which provides it with recurring income and constant cash flow. We initiate coverage on the stock with a Buy call.

Our fair value for Dayang is RM2.80, based on PER of 15x FY12 EPS. This valuation is in line with the O&G industry’s average PER of 14x FY12 earnings, as well as its peers Petra Energy, Alam, Petra Perdana and Tanjung Offshore, which we value at 15x FY12 EPS. We like Dayang’s resilient business, which have helped the company weather through the economic recession.

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