Brokers’ take: Maybank initiates coverage on Dyna-Mac with ‘buy’
Chong Xin Wei
MAYBANK Securities (*see amendment note) initiated coverage on Dyna-Mac Holdings with a “buy” call as the brokerage deemed the stock to be a “significantly undervalued” counter that is currently trading at an “attractive entry level”.
Its target price of S$0.35 is pegged to 20 times FY2023 price-to-earnings ratio estimate, representing a 30 per cent discount to its global-listed peers.
On Monday (Apr 17), analyst Jarick Seet highlighted Dyna-Mac, which fabricates topside modules for the offshore oil and gas (O&G) industry, for its strong order book and strategic plans for expansion.
He deemed the company as “one of the few remaining floating production storage and offloading (FPSO) topside module fabricators with a good track record and sizable production scale and capacity, especially locally”.
This comes amid an industry shortage of FPSO capacity, which resulted from the oil price crash in 2016.
In Seet’s view, Dyna-Mac is in an “enviable position” to capture the surge in FPSO demand as oil prices start to recover, with investments in the O&G space returning to drive the price of related assets upwards.
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The analyst said the company is expected to secure larger orders with potentially higher margins, including an estimated S$600 million worth of orders by the fourth quarter of 2023.
Seet also noted Dyna-Mac’s strong net cash position with no debt.
He said the group’s future acquisitions should focus more on recurring income – such as maintenance or providing services – rather than entities that are order book-reliant, such as the group’s core business.
“We believe it will likely find targets of a similar size as Dyna-Mac given its huge war chest, and it could potentially double its profit.”
As the company is operating at close to full capacity, Seet noted the group may acquire more land to increase its yard capacity by 30 per cent at the end of FY2023.
He also said shareholders should potentially be rewarded with higher dividends.
Shares of Dyna-Mac were trading 6.3 per cent or S$0.015 higher at S$0.26, before the noon trading break.
*Amendment note: An earlier version of this article referred to Maybank Securities using its previous name, Maybank Kim Eng.
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