KENANGA RESEARCH Company update

20 July 2010

BUY
RM3.17
Naim Holdings
Target Price: RM4.10 Positive outlook for Dayang
Stock data We met with Tengku Yusof and Bailey Kho, Managing Director and Head of
Market cap (RMm): 792.5 Corporate Affairs of Dayang Enterprise Holding Bhd. Following the meeting,
Issued shares (m): 250.0 we came away positively as the company is actively bidding for new projects
52-week range: RM1.90-RM3.70 from Petronas and adding new contracts to its existing RM1.1bn order
3-mth avg daily volume: 91,577 shrs book. Dayang is seeing an excellent market opportunities. Naim owns 36% of
Bloomberg code: NHB MK Dayang
YTD price chg: +7.1 %
YTD KLCI chg: +4.7 % l Positive market outlook for Topside Maintenance.Significant amount of
Est. free float: 50.1% offshore topside structural maintenance contracts is expected to be open
Major shareholders: for tender over the next 6-12 months. In 2010, there will be RM2.0b worth
Island Harrests S/B: 12.3 %
of expiring maintenance contracts up for renewals. Dayang will be looking
Datuk Hasmin N. 11.7 %
Hasnan:: at bidding for some of these contracts.
Tapak Beringin S/B: 11.0%
Lembaga Tabung Haji: 10.0 % l Large orderbook of RM1.1b. I n March 2010 Dayang announced that it
Datuk Abdul Hamed 4.9% has been awarded RM400m contract by Shell, this has boosted Dayang’s
Sepawi: order book to RM1.1b which will last till 2015.
KLCI FBM70 FBM100 Syariah Hijrah
No No No Yes No l Potential new contracts on the horizon. Earning rerating for Dayang is
Consensus expected given that it has a current tender book of RM540m and there
FYE 31 Dec 2010E 2011E
is RM1.3b upcoming maintenance contracts tenders from Petronas
Net profit (RMm): 91.5 105.5 for the remaining part of 2010. Besides Dayang, bidders for these
EPS (sen): 39.0 42.8 contracts are Petra Energy, Kencana, Shapadu & Vastalux. However, we
believe Dayang has a relative advantage given its bidding success rate of
Forecast revision 75% and excellent track record of 100% on time delivery over the last 20
FYE 31 Dec 2010E 2011E years. One of the key reasons is its investment in sufficient operating
Revision (%): - - capacity with 4 workboats and has a strong marine fleet size with 37
Net profit (RMm): 79.9 92.3 vessels to support its maintenance services. This has also enabled the
company to enjoy high operating margin of 22%.
Share price chart
l Oil & Gas – a growing earnings contributor for Naim . Besides strong
earnings contribution, Naim’s 36% stake in Dayang has already doubled in
investment value given its low entry cost of only 96sen per share of and
considering the last closing price of RM2.09, Naim has an unrealized
investment gain of RM143m. At 96sen, the effective entry valuation in
Dayang is only 3.6x FY11 EPS of 27.2sen. Based on consensus estimates,
Dayang could contribute net profit of RM24m to Naim in FY10 and RM35m
in FY11 with possible further upgrade if awarding new contracts. These
provide stable and recurring profit to Naim. At the juncture, we only
The Research Team
estimate Dayang contributes RM15m in FY10 and RM16m in FY11, hence,
research@kenanga.com.my we see room to raise our earning estimates in Naim as well as valuation.
Tel: 603-2713 2292
l BUY maintain for Naim with a price target of RM4.10 applying a 11x
FY10F EPS of 36.9 sen and a 41% discount to the top three construction
companies average of 16.9x. Naim is the prime beneficiary of pump
priming for SCORE including potential infrastructure investments and is in
line to secure major projects while FDI will eventually draw new population
growth into Sarawak benefitting its property development division.

PP7004/02/2011(029201)
 Earnings Estimates
FYE 31 Dec (RMm) 2007 2008 2009 2010E 2011E
Revenues 646.0 523.4 527.0 617.4 682.7
Pretax profit 126.3 84.4 110.0 129.3 136.7
Net profit 76.5 62.5 78.7 95.0 100.5
Net profit growth 15% -18% 26% 21% 6%
EPS, sen 30.6 25.0 31.5 38.0 40.2
DPS, sen 11.0 10.9 13.0 13.0 13.0
NTA, RM 2.15 2.27 2.47 2.72 3.00
PER 14.49 5.52 10.48 7.63 7.21
P/NTA 2.06 0.61 1.33 1.06 0.97
ROE 14% 11% 13% 14% 13%
Div yield 2% 8% 4% 4% 4%

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Naim Holdings – 20 July 2010 Page 2 of 2