Analysts have increased their target prices on Dyna-Mac after the company said it more than doubled its order book to $896 million after winning $456.8 million worth of contracts.
Maybank Securities analyst Jarick Seet has lifted his target price on Dyna-Mac to 46 cents from 42 cents previously
The main contract involves the construction of process modules and is Dyna-Mac’s largest-ever contract win so far, involving record tonnage and number of process modules. The rest of the contracts include the provision of services for the execution, fabrication, installation and integration work on vessels, and scope increase for current projects.
Seet, who has also kept his “buy” call on Dyna-Mac, says he remains “bullish” on the floating production storage and offloading (FPSO) outlook with the company being a “key beneficiary” of this multi-year upcycle.
“FPSO charter rates are still trending up due to lack of supply. FPSO new builds are rising, with the pipeline of upcoming FPSOs still strong,” says Seet.
As such, Seet expects Dyna-Mac to win another $100 million to $200 million worth of contracts by 2H2024, while noting that the company has increased its capacity by 50% - 60% while also upgrading its capabilities to allow further optimization of construction methodology and production workflow.
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On this, Seet has lifted his patmi estimates for FY2025 and FY2026 by 7.3% and 7.4%. His new target price is pegged to 15 times of blended P/E to his FY2024 and FY2025 earnings estimates.
“[Dyna-Mac] should continue to rerate accordingly as it executes its larger-sized contracts and achieves better profitability despite the strong share price performance,” he says.
OCBC Investment Research (OIR) analyst Ada Lim has also raised her fair value estimate to 44.5 cents from 42.0 cents previously.
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"We had previously assumed that the company would secure $400 million worth of new orders in FY2024. This seemed reasonable, in our view, given that Dyna-Mac had previously
secured $358 million and $319 million worth of new orders in FY2023 and FY2021, respectively," says Lim.
"However, recent contract wins would have been worth at least $458 million – and that is assuming that no revenue has been recognised from last year’s order book," she adds.
Like Maybank's Seet, Lim believes that the company's expanded yard space and potential enhancements provide it with a "comfortable level" of capacity to deliver on the increased quantum of the projects.
Lim, who has also kept her "buy" call on Dyna-Mac, says she sees "great potential" for the company to grow organically "in a manner that is accretive to earnings" in the near future, thanks to its healthy net cash position.
Her new target price reflects further upside potential for the company amid a stronger-than-expected upcycle.
"Our forecasts take into consideration the issuance of bonus warrants; in our view, existing investors can consider exercising their warrants to avoid dilution and to participate in the company’s future growth," she says.
As at 10.45am, shares in Dyna-Mac are trading flat at 39.5 cents.
