KUALA LUMPUR (Jan 15): Kenanga Research has downgraded Dayang Enterprise Holdings Bhd to “market perform” from “outperform” with a lower target price (TP) of RM1.20, from RM1.35 previously, as it believes the stock is fairly valued now following share price hike and as weaker outlook is expected for the company.

In a note today, Kenanga Research said Dayang’s share price had already delivered a positive return of 14% since the research house upgraded the stock to “outperform” in November last year, whereby the stock was traded at RM1.04 compared to RM1.19 yesterday.

Given the flattish activity outlook guided by Petronas in 2021 on flattish demand for offshore maintenance and hook-up and commissioning, it is likely to impact contractors’ operating space in the sector, like Dayang.

Hence, Kenanga Research has trimmed its earnings forecasts for Dayang by 11% to RM82 million for the financial year ending Dec 31, 2021 (FY21) after lowering its work order recognition assumptions.

Meanwhile, it also said Dayang's fourth quarter ended Dec 31, 2020 (4QFY20) may post sequentially weaker results, given the monsoon season.

Overall, the research house is anticipating the company to generate annual earnings of RM62 million in FY20, which is 74% year-on-year lower than RM236.3 million posted in FY19.

“Risks to our call include: stronger-than-expected work orders, stronger-than-expected margins, and higher-than-expected vessel utilisation,” said Kenanga Research.

Meanwhile, the research house is positive on the contract wins announced yesterday, as this showcased Dayang’s capabilities in securing new clientele.

However, it guesstimated the total value to be rather smallish at roughly less than RM20 million or less than 1% compared to the company’s order book of RM3.5 billion.

To recap, Dayang announced that it was awarded a contract by Mubadala Petroleum for the provision of Pan Malaysia Maintenance, Construction and Modification (PM-MCM). The duration is effective from Dec 9, 2020, expiring July 16, 2023, with an option to extend one year.

At 11.30am, Dayang shares rose one sen or 0.84% to RM1.20 apiece today, giving it a market capitalisation of RM1.38 billion.

The stock has gained 60% from its recent low of 75 sen on Oct 30, 2020. However, compared to last year’s closing peak of RM2.95 on Feb 20, the stock fell by 59%.