KUCHING: Sarawak-based oil and gas (O&G) service provider Dayang Enterprise Holdings Bhd’s (Dayang) profit after tax rose 52 per cent to an all time high of RM68 million year-to-date from RM45 million in 2009.

HIGHER REVENUE: Photo shows the offices of Dayang in Miri. The company says the higher revenue in the current quarter as compared with the corresponding quarter was mainly due to the higher value of work orders received and performed in that quarter.

In addition, its revenue rose to RM255 million from RM197 million – an increase of RM58 million or 30 per cent from the previous corresponding year. The company announced its fourth quarter ended December 31, 2010 (4Q10) unaudited results yesterday.

Comparatively, the group’s revenue for the current quarter increased by 111 per cent while profit before tax and total comprehensive income increased by 266 per cent and 178 per cent respectively, when compared with the current quarter ended December 31, 2009.

The company said the higher revenue in the current quarter as compared with the corresponding quarter was mainly due to the higher value of work orders received and performed in the current quarter.

Whilst revenue increased by 111 per cent to RM43.8 million, profit before tax for the current quarter increased by 266 per cent to RM15.7 million. That was in view of the fact that the work orders in the current quarter had a higher profit margin contribution.

On the other hand, the group’s associate, Syarikat Borcos Shipping Sdn Bhd (Borcos) also contributed a profit of approximately RM0.5 million. Overall, the group’s total profit before tax for the current quarter increased by 274 per cent.

Commenting on the company’s prospects, it said the group has on-going contracts exceeding RM1.6 million to last at least until 2016. Its order book recently swelled to RM1.6 billion after winning a contract from Petronas Carigali Sdn Bhd (PCSB) on Feb 7, 2011.

The RM802 million topside maintenance contract covers Sabah, Sarawak and also Peninsular Malaysia and was only the first of two packages that should total RM1.2 billion.

The contract was notably a ‘call-up’ contract made up of work orders which would be awarded at the discretion of PCSB during the duration of the contract and the values of the work orders were based on the contract schedule of rates.

Dayang expected the contract to contribute positively to the earnings and net assets of the group for the financial year ending December 31, 2011 and the subsequent financial periods within the duration of the contract.

“The contract is not expected to have any material effect on the gearing of the group for the duration of the contract as funding for the contract is expected to be internally generated,” it said in a filling to Bursa recently.

On top of that, analysts foresaw that there would be an upcoming potential merger and acquisition (M&A) which in turn would be one of the main catalyst for the group.

“We believe that news on contract flows has been pretty much priced into Dayang but other catalyst have now emerged,” said ECM Libra Capital Sdn Bhd analyst Bernard Ching.

“Their recent RM245 million total fund raising exercise included a RM110 million issue of rights and RM135 million from the sale of Borcos, indicates to us that the group is out shopping. Whether they would be buying new assets or buying out competitors remains to be seen and we will be on lookout for further development on this,” he added.

Given that M&A activities were on the cards, the research house believed that Dayang could be deserving of a higher multiple.

“If the group acquires, it would be more comparable to bigger cap O&G stocks like Wah Seong and SapuraCrest,” Ching added.

On the sector outlook MIDF Research senior analyst Syed Muhammed Kifni pointed out that crude oil prices have recently exceeded US$100 per barrel and would remain at elevated levels in the foreseeable future.

At these price levels, it shall encourage more upstream as well as downstream activities by Petronas and other oil majors. In addition, the Economic Transformation Programme (ETP) provided a clear direction to further propel the development of Malaysia’s oil and gas sector.

The actionable three prong strategic roadmaps under the ETP are (i) growth in upstream, (ii) growth in downstream, and (iii) hub for oil field services, he revealed.

“Petronas has announced its intention to allocate more resources on local upstream activities with emphasis on deepwater exploration and production (E&P).

“As most of the deep water acreages are located off the coast of East Malaysia, we can expect increased E&P activities in the region with the benefits cascading down to the entire oil and gas value chain.

“Hence the local oil and gas sector is expected to be buoyant in 2011,” he added.

Meanwhile, Dayang’s shares were at RM2.09 per share as at Bursa Malaysia’s closing yesterday, a drop of three sen from the opening price of RM2.12.