Date: October 14, 2024
Broker Name: Maybank Research Pte Ltd
Offer Update
Hanwha Group has raised its offer to SGD0.67 per share for Dyna-Mac, surpassing the previous target price of SGD0.64. The offer is final, and there will be no further increases. This represents a 10-year high, and shareholders are advised to accept it. Event-driven and institutional funds are expected to take advantage of the offer, as the upside is limited unless Hanwha acquires more than 50% of the share float, potentially allowing the company to remain listed.
Financial Overview
- Share Price: SGD 0.65
- 12-Month Price Target: SGD 0.64
- Market Capitalization: SGD808.2 million
- Order Book: SGD896 million
- Gross Margins: Increased to 27.6% in 1H24, compared to 13.5% in 1H23.
- Net Order Book: SGD681.3 million, providing visibility for FY24 and FY25.
Outlook and Growth Prospects
Dyna-Mac’s order book has significantly doubled in the past year, with expectations to execute faster due to the company’s expanded land capacity. Margins for new projects are higher than anticipated, positioning the company to benefit from a robust FPSO (Floating Production Storage and Offloading) upcycle. Additionally, Dyna-Mac remains a key player in the O&G sector with a focus on engineering, procurement, fabrication, and commissioning for top-side modules.
Company Strategy
Dyna-Mac has been strategically positioning itself to benefit from tailwinds in the O&G industry. The group is financially strong with zero debt and SGD128.5 million in net cash, which could support future acquisitions. The company is also diversifying into LNG and renewable energy projects, particularly in green hydrogen and ammonia production modules, which aligns with global decarbonization efforts.
Financial Performance
Revenue and Profit Growth
- Revenue: SGD520 million expected for FY24 (up from SGD385 million in FY23).
- Core Net Profit: Expected to reach SGD60.8 million in FY24, reflecting a growth of 112% YoY.
- Core EPS: Projected at 4.9 cents for FY24, up from 2.3 cents in FY23.
Dividend Policy
Dyna-Mac’s dividend payout ratio is expected to remain stable at around 35.7%, with a projected net DPS of 1.7 cents for FY24. The company’s strong cash flow position allows for continued dividends, supported by its zero debt.
ESG Initiatives
Dyna-Mac is actively working on reducing its environmental impact by adopting energy-efficient practices. These include using electric forklifts and compressors and replacing high-energy lights with LED alternatives. The company also emphasizes proper waste management, incorporating the “Reduce, Reuse, Recycle” philosophy.
Risks and Challenges
Despite its positive outlook, Dyna-Mac faces risks such as declining oil prices and rising labor costs, which could impact margins. Additionally, competition from new market entrants may reduce its market share in the short term.
Strategic Importance of Hanwha’s Offer
Hanwha’s offer aims for a controlling stake in Dyna-Mac, but it is not necessarily an attempt to delist the company. The offer is conditional on acquiring more than 50% of the share float, and warrants are excluded from the offer. The founder’s estate has expressed the need to divest shares before exercising warrants to avoid triggering a mandatory general offer.
