Yesterday, Dayang Enterprise Bhd (Dayang) announced that it had acquired a 40% stake in Syarikat Borcos Shipping S/B (Borcos) for RM132.08m cash. The acquisition will come with a profit guarantee of RM65m for its financial year ending Dec 31, 2010. The purchase consideration is based on a P/BV of 1.8x and FY08 PER of 6.95. It is expected to be completed by December 2009. See also our report on Naim Holdings, owner of a 36% stake in Dayang.
Valuation for Borcos reasonable. Although the offer price is below that of its offshore marine support peers and industry average, we believe the valuation is fair since vessel operators like Alam, Petra Perdana and Tanjung Offshore should command a premium as they own mostly AHTS and supply vessels, which fetch a higher rate than other OSVs. Maintain Overweight on the sector, with Alam (Buy, TP: RM1.95), Petra Perdana (Buy, TP: RM2.81) and Tanjung Offshore (Buy, TP: RM1.74).
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