Khairani Afifi Noordin Fri, Jun 17, 2022
Dyna-Mac Holdings is an overlooked beneficiary of the oil and gas (O&G) capex cycle, said UOB Kay Hian’s Singapore research team in an unrated report.
The analysts highlighted that Dyna-Mac reported an $180 million order for the construction of topside modules for a floating production storage and offloading vessel (FPSO) on May 22, bringing its orderbook size to $641 million — representing nearly three times its 2021 revenue.
“Management appears confident about increasing the size of its orderbook but also stated that it will be prudent and will take on work that it is confident of executing. It is firm in not veering away from its exposure to the O&G sector and expects more work in the carbon capture business,” they added.
In 2021, Dyna-Mac reported a net profit of $5.6 million, reversing from a loss of $58.4 million in 2020. For 1QFY2022, the company reported a net profit of $1.9 million, down 17% y-o-y due to a high base in the year-ago period.
“On an annualised basis, the company appears to be on track for at least 30% earnings growth in 2022. As at end-1QFY2022, the company had cash of $114 million and no debt. Dyna-Mac’s cash currently represents about 75% of its market capitalisation. It has not paid a dividend in the past five years,” the analysts said.
Dyna-Mac is currently trading at 47.7x PE and 8.8x P/B versus its peers’ average of 20.4x PE and 2.5x P/B. On an ex-cash basis and using 2021 EPS, the company currently trades 7.1x PE, they add.
“Based on annualised 1QFY2022 EPS, Dyna-Mac trades at a 2022 PE of 5.2x. In 2021, Dyna-Mac generated an ROE of 21% which was double that of its peers’ average of just over 10%.”
Dyna-Mac’s new management follows the passing of its founder Lim Tze Jong in 4QFY2021. The new CEO Lim Ah Cheng and chief financial officer Jerald Lee were both previously with Keppel Offshore & Marine.
The company has a strategic partnership with Malaysia Marine and Heavy Engineering; China Merchants Group (CMG) as well as Baker Technologies to increase its ability to scale up its production when needed. Its CGM linkage also enables it to access relatively cheaper financing via its banking arm, the analysts pointed out.