DAYANG (5141) - Aramco had invested, what about you now ?
Today, I had to tell you that this bull in the KLSE is not looking to give up anytime soon despite having run for almost 2 months. Although there is a rest in February, this bull is looking set to continue it's charge. Albeit the known problems in the financial market, such as high level of debts, I think we have to realize that there are also high level of cash in the market, waiting to prey into good deals.
As the oil market plays a substantial role in the Malaysian economy, it is notable that the stabilizing of oil price above USD 50 per barrel is encouraging big corporate in pouring out the cash load and churn the economy moving again. The cartel movement in the reduction of oil output by the OPEC and Non OPEC members had also put a golden key into restarting the activities in the oil and gas industry.
Now, I have to tell you that I am looking back into the oil and gas industry in Malaysia due to
- Saudi Aramco confirmed to invest USD 7 billion (RM 31 billion) for a 50% stake into selective Petronas Rapid project in Johor. (Source - The Star)
- The stabilization of the WTI Crude Oil Price above USD 50 per barrel
- Oil and Gas industry rebalancing on business cost structure, adapting to lower oil price
For me, I viewed that the USD 7 billion investment of Saudi Aramco into Petronas Rapid Project is the top most important factor to start looking out at the local oil and gas company. And this project will also give the very needed confidence for the local oil and gas industry in ploughing back the cash into projects, and also equity market to hunt into bargain deal, especially those that are still being able to perform despite the challenging environment.
So before I am going to tell you this gem company that had been hidden away from the investor radar, let me show you 2 examples where the company share price are not punished despite the heavy losses in it's financial statement.
The first example is definitely Bumi Armada Berhad. (Armada - 5210). The oil recovery sentiment is so strong until even Armada, which posted massive losses for it's FYE 2016 is able to spare from a massive bloodshed.
As you can see from the below, Armada posted RM 1.9 billion in losses for FYE 2016, which is translated into a EPS of -32 cents. Although the share open gap down in a huge manner, the strong eat up is just mind blowing and eyes popping. So is the market telling us that even a company which performed so terribly does not deserve to be punished in it's share price because investor had went gaga over the recovery of oil market???
Honestly, I had no idea, but the amount of money that is put into buying up Armada ain't a joke at all. It takes real guts to buy in such amount, and real guts usually come with considerable amount of facts in hand.
The second example is E.A Technique (M) Berhad. Now this is a not so bad example as Bumi Armada, but it's 4th quarter also dipped into the red zone, putting up an EPS of -4.3. However, the total FYE 2016 EPS is still positive at 1.74 cents. Looking at the share price, it had similar effect like Armada where the share gap down, however, recovered to it's position during the end of day. Albeit Eatech trading at 67 cents, it is considered pricey in terms of earning, and also trading above it's NTA value.
So again, mind blowing facts. Can these 2 example summarized that oil investor are too rich until they just bang into anything, disregard it's valuation ???
Here comes the 3rd company, which is the company which I think you should be seriously looking into if you would want to add an oil and gas company into your investment portfolio.
Yea, the company is as below.
*** "What the f*** !!?? Are you showing me a Goat ???" ***
And oh yeah, this company is called "Big Goat". In Mandarin, it is called 大(da) 羊(yang). So, do you get it now ?
Now, what is so interesting about Dayang Enterprise Holdings Berhad (Dayang - 5141) now ?
I am going to be very direct to the point, and we will talk about it's financial performance. As you can see, the last 2 quarter performance, it's result had been very encouraging. During the 3rd quarter, the company came back from the red, and record an EPS of 4.12 cents. And subsequently on the 4th quarter FYE 2016, the company again posted a positive EPS of 5.37 cents.
The revenue and profits are generated from service, maintenance and repair contracts, which are business revenue and profits. Although there had not been big changes in the revenue, the profits are hugely attributable from the lower operational and input cost from the whole oil and gas industry supply chain, which is a very good thing for the industry as a whole. At the current costing, Dayang could be looking to put in a total EPS of 18 to 19 cents for 4 rolling quarters, which can effectively value Dayang at RM 1.80 to RM 1.90 based on PER x10.
As you can see in the chart, there had actually been a massive accumulation of Dayang at the price of RM 1.10 to RM 1.40 back then at February 2016. Supported with the good underlying result, it will be in no time that Dayang will revisit the resistant level of RM 1.40. I believe that with the current lower operational cost in the whole general oil and gas industry, Dayang is one of the best option if you are planning to put in a oil and gas company into your investment profile.
Comparing to Armada and Eatech, Dayang had 9 cents EPS from 2 quarters, and can be annualized towards 18 cents for 4 rolling quarters. Above that, the NTA of Dayang is also above it's share price, which is RM 1.45. Both figures are better than Armada and Eatech, however, Dayang had yet to really saw it's share price moving upwards for the time being.
Now, again. If you are not a risk taker, please do not invest in this volatile commodity based counter. However, if you see the potential in this company despite the current challenging environment, I believe that your investment will be greatly rewarded when the right time comes. You wouldn't know if Dayang could be ringing at RM 2.00 at the end of this year, who knows ?
DAYANG (5141) - Aramco had invested, what about you now ?