Dayang-A Brief Anatomy

Yes, as expected Dayang Enterprise (Dayang)breached the RM2.00 resistance price and climbed up to RM2.07 before ending at RM2.01,for a 4 sen increase at the noon break. The parent company ,Naim Cendera has also been moving upwards.This movement of both counters gathered momentum after the purchase of BORCOS Shipping.

As mentioned in an earlier posting, Dayang was a sleeper of a share. From its initial listing in April 2008 at the offer price of RM1.45, it went up to RM1.53 and then slept there before going down to 70 sen in March 2009. It then slept at the range price of RM1.20-RM1.30 for most of the year. This is way below its offer price of RM1.45

Let us assume that you bought the share at RM1.50 on the initial listing week. That was 22 months ago today. At today's price,say at RM2.00, you have made RM500.

Let us now assume that you have placed the RM1,500 in a fixed deposit account of 4.5% at the same time in 2008 for a two years locked-down period. The calculated interest at the end of 2009 is provided on the higher side; in the region of RM150(RM75 +RM75 )or so. Therefore, you have actually made RM150 of interest income for the two years which is obviously better than the 2.5% rate today.

Now apart from the apparent capitalization gain of RM500 today, let us now consider the dividend paid out so far. The dividend declared in the year 2008 and 2009 were 7%(-25% government tax) each year. That will amount to a net dividend of RM105. The additional interim dividend just declared in December last year was RM50 tax exempt.That would mean that you have collected RM155.00 in dividend income. So, ringgit to ringgit,you gain more in dividend by RM5. And it is still not April yet,my friend.

For a Dayang investor,the net return to you thus far will be RM500 as capital gains plus RM155 bringing the value you have gained to RM655. Another final dividend will be due.

So, let us now annualised RM655 for the two years 2008 and 2009. This should work out to RM 327.50 annually.

As such the return to the original outlay of RM1500 is 49.12% per year. Isn't this better than even Amanah Saham unit trusts returns?

I believe Dayang has both the political and the economic drivers to move up. As an ancillary oil and gas player,Dayang has benefited plenty in maintenance service fabrication work, among others.It has a big book of RM677 million of contracts to keep it on its toes till 2012. It can also leverage of the technical expertise of Naim Cendera to assist in some of these contracts. Dayang’s current order book comprises mainly works for Petronas Carigali Sdn Bhd, Sarawak Shell Bhd/Sabah Shell Petroleum Co and Murphy Sabah Oil Co Ltd, and these largely made up of topside and offshore structures maintenance and work-overs services.

Dayang owns three subsidiaries, namely: Dayang Enterprise Sdn Bhd (DESB), which is principally involved in the provision of offshore topside maintenance services, minor fabrication works and offshore hook-up and commissioning; DESB Marine Service Sdn Bhd, which undertakes chartering of marine vessels services; and Fortune Triumph Sdn Bhd, which specialises in the provision of rental equipment.

Offshore topside maintenance for oil and gas in Malaysia is expected to grow by 8% to 10% per year over the next three years.Currently, offshore topside maintenance services accounts for more than 80% of Dayang’s group revenue and profit for the first half of this year. Can you imagine Dayang actually services 309 platforms out of the 400 in Malaysia!

This means that the company dominates some 77% share of this market segment.

By servicing 77% of the platforms in Malaysia, Dayang has gained the economies of scale as it is able to optimise its resource deployment, hence lowering its per unit cost of operation.

The near monopoly position in coastal Borneo to service the oil companies be it in shipping,general services or in expert engineering services should be the pivot of its strength.

To improve its strength,Dayang Enterprise Holdings Bhd has entered into a joint venture agreement with Alphaone Engineering Sdn Bhd to prepare proposals and execute projects in Brunei's oil and gas sector.

The 50-50 joint-venture company to be incorporated according to Brunei laws would have an authorised share capital of B$1 million, Dayang told Bursa Malaysia.

"The initial capital investment is estimated to be RM250,000 and Dayang's portion of approximately RM125,000 shall be funded by internally generated funds and/or financing from banks or financial instruments," it said.

It said the joint venture provided an opportunity for Dayang to venture into the overseas market in its effort to reinforce its competitive edge in the oil and gas industry.

Technically, I also believe it is a cornered stock with possibly very little market spread.

It should be a good stock to hold on to for a little while more.