Brokers’ take: Maybank cuts Dyna-Mac target to S$0.38 on proposed bonus warrants
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Michelle Zhu
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MAYBANK Securities lowered its price target on Dyna-Mac to S$0.38 from S$0.51, in response to the offshore oil-and-gas contractor’s plans to issue bonus warrants to raise up to S$31.1 million.
The new target accounts for a diluted company share base, assuming a 100 per cent conversion of the company’s proposed bonus issue of up to 207.4 million warrants, on the basis of one warrant for every five existing shares.
It is pegged to a 16.5 times price-to-earnings multiple based on Maybank’s estimates for FY2024.
In a report on Friday (Jan 5), analyst Jarick Seet said he expects the warrants to be fully converted if approved, and that the exercise price of S$0.15 per share represents a “deep discount to current price levels”. The analyst is also positive on the company’s US$8.25 million acquisition of Exterran Offshore, which he expects to increase Dyna-Mac’s capacity by 30 per cent. This has lifted Maybank’s earnings estimates for the company by 10 per cent for FY2024 and FY2025.
Seet added: “We believe that the further expansion of (Dyna-Mac’s) capacity through this acquisition signals bullishness by management on its future potential order wins, which will likely lead to higher revenue and profitability.”
The analyst, however, noted that while the acquisition cost of Exterran Offshore’s yard facilities factors in a net book value of US$3.65 million, a recent valuation report by OrangeTee Advisory valued the land and building at S$17 million.
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Lim & Tan Securities said this implies that the US$8.25 million acquisition was done at a market-discounted price, although the acquisition price-to-book value of 2.26 times “seems high”.
“More importantly, the acquisition makes strategic sense, given that it would allow Dyna-Mac to reduce outsourcing its jobs; the new facility is located next to its existing production facility, allowing it ease in transferring jobs and work-loads to the new facility, reducing execution risks and transportation costs,” said the research house in a Thursday report.
Shares of Dyna-Mac were trading S$0.005 or 1.6 per cent higher at S$0.32 as at 10.53 am on Friday.
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