Investment Report:

This report covers Dyna-Mac Holdings and InnoTek Limited, with a focus on their financial performance, potential catalysts, and investment recommendations. It also includes insights into other top companies such as Jardine Matheson, DBS Bank, and Hongkong Land, all of which are shaping the Singaporean market landscape.

Investment Recommendation:

Hold on Dyna-Mac Holdings and InnoTek Limited for steady growth and potential price appreciation.

Investment Thesis:

Dyna-Mac Holdings (SGD 0.50):
Dyna-Mac Holdings is currently under a tender offer from Hanwha Aerospace and Hanwha Ocean. The offer price stands at SGD 0.60 per share, reflecting a 21.2% premium over the last traded price. This deal aims to secure a controlling stake, creating synergies between Hanwha’s offshore oil platforms and Dyna-Mac’s construction expertise. Dyna-Mac’s financials are robust, having generated SGD 260 million in revenue and SGD 38.8 million in net income in the first half of 2024. With global demand for Floating Production Storage and Offloading (FPSO) vessels growing, this acquisition provides opportunities for scale and enhanced productivity.

• Earnings Outlook: With expected synergies in the offshore plant sector, Dyna-Mac’s earnings are projected to increase.
• Target Price: SGD 0.64 – SGD 0.71
• Stop-loss Price: SGD 0.55
• Catalysts: Global demand for offshore platforms and regulatory approval of the acquisition are key drivers for potential price appreciation.

InnoTek Limited (SGD 0.50):
InnoTek achieved a strong performance in the first half of 2024, with a 30.9% increase in revenue to SGD 121.6 million. Key growth drivers include diversification into GPU servers, automotive components, and electric vehicle (EV) infrastructure. Despite a stable net profit of SGD 3.1 million, inventory obsolescence provisions masked the potential upside. Excluding this provision, net profit would have surged to SGD 6.3 million. The company maintains a strong balance sheet with SGD 55.9 million in net cash, positioning itself for further expansion into EV battery and charging station manufacturing.

• Earnings Outlook: InnoTek is well-positioned to benefit from the global shift toward electric vehicles and increased demand for GPU servers.
• Target Price: SGD 0.56
• Stop-loss Price: SGD 0.48
• Catalysts: Expansion into EV components, GPU server projects, and diversification outside of China.

Detailed Company Analysis:

1. Dyna-Mac Holdings:

   • Financial Performance: The company reported SGD 260 million in revenue and SGD 38.8 million in net income for the first half of 2024.
   • Stock Impact: The tender offer at SGD 0.60 represents a 50% premium over the 12-month volume-weighted average price.
   • Risks: The tender offer hinges on approval from the Competition and Consumer Commission of Singapore (CCCS), and any regulatory delays could affect the stock price.
   • Valuation: The stock is trading at a P/E ratio of 9x, which is attractive given the potential synergies and expected growth in offshore oil platforms.

2. InnoTek Limited:

   • Financial Results: With a 30.9% revenue growth in 1H2024 and a strong cash position of SGD 55.9 million, InnoTek is expanding into sectors like GPU servers and EV infrastructure.
   • Stock Impact: Trading at 11.5x FY2024 P/E and a price-to-book ratio of 0.7x, InnoTek is well-valued compared to peers.
   • Risks: The slowdown in the Office Automation segment and potential headwinds in China’s manufacturing sector could pose risks to growth.
   • Valuation: Its ex-cash P/E of 6x and dividend yield of 4% make it an attractive hold for investors looking for stable growth and returns.

Financial Targets:

• Dyna-Mac:
  • Target Price: SGD 0.64 – SGD 0.71
  • Stop-loss Price: SGD 0.55
• InnoTek:
  • Target Price: SGD 0.56
  • Stop-loss Price: SGD 0.48

Recommendation Date:

12 September 2024

Broker Information:

Report issued by Lim & Tan Securities Pte Ltd.