PETALING JAYA: Dayang Enterprise Holdings Bhd may see its outlook improving moving forward, says CGS-CIMB Research.

       Following a management update, the research house said Dayang’s earnings appear to be set for a strong rebound in the near term from the recently ended second quarter period.

       “This is as the teething issues from a change in contracting strategies by its client have been substantially resolved and strong order flow momentum has resumed,” said CGS-CIMB Research in its report yesterday.

       The execution of its work schedule for the rest of the year appears to be on track, while the interim farm-in from the Asset Integrity Backlog Clearance (ABC) contract should add incrementally to revenues in the second to the fourth quarters of this year, it added.

       The ABC contract is set to be awarded by the end of this year.

       The contract comprises an aggregation of orders for previously deferred offshore maintenance and rectification works due to spending cuts by oil majors during the oil market rout, said CGS-CIMB Research.

       The group’s management also said the contract is for a period of four years from January 2024, and is split into five packages worth some RM4bil to RM5bil.

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       CGS-CIMB Research noted Dayang is trading at an ex-cash 2024 forecast price to earnings ratio of 9.1 times, which is below its 10-year mean of 11.5 times.

       “We consider such valuations attractive for an oil and gas stock with encouraging medium-term growth prospects, excellent track record and a forecast net cash balance sheet.

       “We also see upside potential to earnings from a successful tender for the ABC contract,” the research house added.

       CGS-CIMB Research also said Dayang remains one of its top picks in the sector and broader market.

       Potential catalysts for the group include further job wins, better-than-expected order flows and margins and a recovery in quarterly profits.