By Lawrence Yong
Sarawak’s Dayang Enterprise 
Holdings Bhd (DEHB), one of the best performing oil and gas stocks in May, still has room upside if the RM4 billion HUCC jobs that it is anticipated to win are factored in, analysts said.
Despite the stock’s price soaring almost 60% this month to RM5.30 before tapering off due to some profit taking, analysts have maintained a target price of RM6-6.87. DEHB also gave investors reason to cheer with its latest financial results, which reported a sharp rise in first quarter profits due to a savvy investment in Perdana Petroleum Bhd.
“We anticipate Dayang will be awarded contracts by another one or two production sharing contracts (PCSs), possibly from Petronas Carigali and other smaller PSCs amounting to about RM1 billion-1.3 billion,” Public Investment Bank (PIVB) research analysts noted.
This month alone, the company has won the first two Pan Malaysia hook up, construction and commissioning (HUCC) contracts – a Shell job worth around RM2-RM2.5 billion and Murphy Sarawak Oil contract worth RM314 million. Both are for a period of five years with extension possibilities. According to PIVB, this brings the group’s outstanding contracts worth to some RM3.8 billion that could last until 2018, triple the amount at the start of the year.
BIMB securities research also re-rated DEHB from ‘neutral’ to ‘buy’ with a target price of RM6.41. Even cautiously factoring in just the recent RM2.5 billion wins, BIMB upgraded Dayang’s FY13 and FY14 earnings by 2% and 30%.
On Wednesday, DEHB said that it’s net profit for 1Q13 stood at RM58.4 million, a sharp 271% year on year (y-o-y) increase. This was after accounting for an extraordinary gain of RM33 million from its investment in Perdana Petroleum, which also recently shot back into profit after making losses for three years. Perdana’s shares are up over 60% so far this year.
DEHB raised its stake by 6% in Perdana to 26.1% in March.
Removing the extraordinary gains, analysts from Hong Leong Investment Bank (HLIB) said that DEHB still posted a stellar 63% y-o-y rise in core net profits to RM25.6 million.
Perdana, mainly a vessel leasing company, is expected to back DEHB for the HUCC jobs by expanding its fleet of offshore support vessels, analysts said. They applauded Perdana for securing vessels while it was still cheap.
PIVB analysts said that despite the sudden business upsize, Dayang should be able to handle the HUCC jobs comfortably as its vessels may be used in Sabah and Sarawak while using Perdana’s vessels for HUCC jobs from Petronas in Peninsula Malaysia. Dayang may soon give a RM700 million contract to Perdana.
Furthermore, DEHB may also have room for a stake in a risk service contract for marginal oil fields, being offered from Malaysia’s state oil Petronas, which would further cement the company’s path up to be one of Malaysia’s top integrated oil and gas service provider. As at end March 2013, the company had cash reserves of RM 147 million.
DEHB last paid out a dividend of 5 sen per share in April, totalling RM27.5 million. After factoring in recent share price gains, DEHB now has a market value close to RM2.7 billion, analysts said.
Naim Cendera Holdings Bhd., a company linked to long-serving Sarawak Chief Minister Abdul Taib Mahmud, has 33.64% in Dayang.
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