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Dayang: what is my target price?    

 

One of the earliest and most experienced providers of integrated services to the oil and gas industry, Dayang is involved in the provision of maintenance services, fabrication operations, hook-up and commissioning and chartering of marine vessels.

Since its inception more than 25 years ago, Dayang has built an impressive track record for innovation, quality, skills and expertise.

The followings are recent contracts for the provision of maintenance, construction and modification services   awarded to Dayang:

Recently secured contracts as follows:

1 From Petronas Carigali on 20th Sept 2017

2 From Murphy Sarawak and Murphy Sabah Oil and Gas on 27th July 2018

3 From Kebabangan Petroleum Operation 20th Aug 2018

4 From Repsol Oil & Gas Malaysia on 29 Aug 2018

5 From J X Nippon Oil & Gas Exploration on 29 Aug 2018

All investors must know this: No share can go up or come down continuously for whatever reason.

After sometime, it must correct its direction. In the case of Dayang, it shot up from 60 sen to Rm 1.36 within 1 month as shown on the above price chart. It went up 76 sen or 227%.

As far as I can remember, I have not seen a similar flight trajectory for another share before. Last Friday it went up 10 sen. Many shareholders thought it would correct on last Monday and sold. But it went up again another 10 sen on Tuesday. Eventually, it dropped 5 sen yesterday with 65 million shares changed hands. Sellers thought they are right and buyers thought it was a good buying opportunity. Who is right?

Day Traders

Day traders can take advantage of this price correction phenomenal to make money. But they must be careful in this case because they may not be able to control their emotion to admit their mistake when the price continues to shoot higher and higher. For example, someone sold his shares yesterday, hoping to buy back at cheaper prices. What will he do if the price continues to rise and he cannot it back at cheaper prices?

I am sure many readers want to know if it will continue to drop today. I cannot advise you to sell or to buy. But I like to point out that in the last few occasions, corrections have been quite mild and short-term day traders have to be extra careful in this case. There are some sellers who will have difficulty to decide whether they should buy back or not if the price continues to shoot higher and higher.  To help you make a good decision, you have to consider the following:

A fair price for Dayang   

Acceleration of profit growth 

You can see from the above table that its EPS for the last 4 quarters were -2.21, 4.03, 5.05 and 10.13 sen.  Based on the following facts:

A Secured 5 new contracts as mentioned above.

B accelerated rate of increase in profit.

C no more delay by monsoon.

It is most likely that its EPS for the coming quarter will be higher than 10.13 sen.

It is safe and conservative to assume that the company can make the same profit of 10.13 sen per share per quarter, in the next 4 quarters for financial year 2019. That means its annual EPS will be 40 sen.

Based on P/E 5, the share price should be 40 X 5 = Rm 2.00.

Based on P/E 10, the share price should be 40 X 10= Rm 4.00

I strongly believe my target price of Rm 3.00 is easily achievable.   

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