Date of Report: 24 October 2024
Broker: OCBC Investment Research Private Limited
Company Overview
Dyna-Mac Holdings Ltd. is a leading global multi-disciplinary contractor based in Singapore, specializing in the engineering, procurement, fabrication, and construction of offshore topside modules. These modules are used in various floating production, storage, and offloading vessels (FPSOs), floating storage and regasification units (FSRUs), and onshore plants. The company also serves the renewables sector, focusing on liquefied natural gas (LNG), green hydrogen, and ammonia projects.
Founded in 1990, Dyna-Mac has over 30 years of experience and a robust track record, delivering more than 300 modules. It has established a presence in key markets, including China, Malaysia, the Philippines, and Indonesia.
Investment Thesis
Dyna-Mac’s strategy centers around niche topside module construction, emphasizing quality, reliability, and timely deliveries. This focus positions the company to capture growing demand for FPSO modules, especially amid a shortage in capacity. The company expanded its yard capacity significantly in 2023, which is expected to support top-line growth. Additionally, its healthy net cash position could enable inorganic growth through accretive acquisitions.
Recent Developments
On 11 September 2024, Hanwha Aerospace and Hanwha Ocean launched a voluntary conditional cash offer for Dyna-Mac’s shares at SGD 0.60 per share. On 14 October 2024, this offer was revised to a final price of SGD 0.67 per share. An Independent Financial Adviser (IFA) circular dispatched on 23 October 2024 deemed the offer fair and reasonable. OCBC concurs with this assessment and recommends shareholders to accept the offer.
Financial Performance
- FY2023 Revenue: SGD 385.2 million
- FY2024E Revenue: SGD 520.2 million
- FY2025E Revenue: SGD 584.2 million
- EBITDA (FY2023): SGD 27.4 million
- EBITDA (FY2024E): SGD 93.6 million
- EBITDA (FY2025E): SGD 99.3 million
- PATMI (FY2023): SGD 28.5 million
- EPS (FY2023): 2.8 Singapore cents
ESG Initiatives
Dyna-Mac is actively working towards sustainability, participating in initiatives like the Carbon Pricing Leadership Coalition (CPLC) and LowCarbonSG. In 2022, the company increased its green energy consumption to 30%, up from 25% in 2021. Other ESG efforts include reducing material waste, fostering a diverse and inclusive work environment, and adhering to anti-corruption and compliance policies.
Investment Summary
- Fair and Reasonable Offer: The revised final offer of SGD 0.67 per share exceeds the fair value estimate of SGD 0.665. Both the IFA and the company’s independent directors advise shareholders to accept the offer.
- Potential Monetization: Accepting the offer allows shareholders to monetize their investment immediately, avoiding illiquidity discounts and potential risks.
- Offer Deadline: Shareholders who intend to accept the offer must do so by 5:30 pm (Singapore time) on 6 November 2024.
Future Catalysts
- Higher value contract wins amid a strong FPSO market upcycle.
- Potential for synergistic acquisitions that could drive earnings growth.
- Strategic partnerships to expand operational and production capacity.
Key Investment Risks
- Challenges in securing new orders with favorable margins in a slowing macroeconomic environment.
- Inability to pass higher costs to customers, which could affect project margins.
- Execution risks, including cost overruns and project delays.
Valuation Metrics
- P/E (FY24E): 13.6x
- P/B (FY24E): 2.6x
- Dividend Yield (FY24E): 2.6%
Analyst Recommendation
The report maintains a “HOLD” rating for Dyna-Mac Holdings as of 24 October 2024, reflecting the belief that the revised offer price represents a fair exit point for shareholders.
