Maybank Securities analyst Jarick Seet has hailed Dyna-Mac’s “explosive” and “spectacular” set of results for the 1HFY2024 ended June 30.
Dyna-Mac reported revenue of $260 million, 43% higher y-o-y while its earnings surged 280% y-o-y to $38.7 million. The higher earnings were attributed to a surge in gross profit margin of 27.6%, more than double the gross profit margin of 13.5% in the corresponding period the year before.
“As its orderbook has doubled to $896 million over the past year and as it has 50% more land, we expect Dyna-Mac to execute its orderbook at a faster pace. And as expected, it secured even higher margins than we expected for the new projects,” Seet writes in his Aug 7 report.
“Gross margin actually surged to 27.6% in 1HFY2024 from 13.5% in 1HFY2023, which justifies our positive stance on the robust FPSO space accompanied by strong growth in revenue. Net orderbook remains at $681.3 million, which is sufficient for FY2024 as well as for FY2025,” he adds.
By 1QFY2025, the analyst expects Dyna-Mac to win $300 million to $400 million worth of orders with margins for these orders likely to be higher compared to those in its existing order book. Dyna-Mac’s margins have risen since the FY2022 to 1HFY2024, Seet points out.
In addition, the company’s capacity would have increased due to the acquisition Exterran Offshore and the new lease from JTC.
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“We expect more projects will be executed at the same time, which points to higher revenue recognition per quarter once renovation and re-layout of new expansion area have been completed,” says Seet. “This should also result in increased efficiency and productivity, which would eventually lead to higher net margins.”
Seet has kept his “buy” call with a higher target price of 64 cents from 62 cents previously, making this the third increase in two months. Seet last raised his target price to 62 cents from 52 cents on July 19 and to 52 cents from 46 cents on June 19. The analyst’s latest target price is based on a FY2024 P/E of 13 times.
With Dyna-Mac’s 1HFY2024 earnings achieving 66% of his FY2024 estimates, the analyst has raised his FY2024 patmi estimate by 3.6%. He has also upped his FY2025 patmi estimate by 3.7%.
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“We expect Dyna-Mac to continue to benefit from the current strong demand for floating production, storage and offloading (FPSO) and it should further re-rate as it executes its larger-size contracts and achieves higher profitability,” says Seet. The stock remains one of his top picks in the small- and mid-cap space.
OCBC Investment Research analyst Ada Lim has also increased her target price of 66.5 cents, up from 60.5 cents previously, as Dyna-Mac's 1HFY2024 results surpassed her expectations.
"Management remains optimistic of the company’s growth outlook amidst a buoyant FPSO market, citing forecasts from Rystad Energy that more than 90 FPSO projects are expected to be awarded globally from 2021 to 2030," she writes in her Aug 7 report.
"The company’s order book as at June 30 stood at a healthy $681.3 million, with deliveries scheduled through FY2026," she adds. "Triangulating this with its order book of $438.2 million as at Dec 31, 2023, we estimate that Dyna -Mac had clinched $503 million worth of new orders in 1HFY2024."
With the company's strong set of 1HFY2024 results and better-than-expected margins in mind, Lim has adjusted her earnings forecast as well. The analyst has kept her "buy" call on the counter.
"Dyna-Mac has expanded its yard capacity significantly in 2023, which will be a positive for top line growth. We think there remains great potential for the company to grow inorganically in a manner that is accretive to earnings in the near future, backed by its healthy net cash position," she writes.
As at 11.12am, shares in Dyna-Mac are trading 2.5 cents higher or 4.81% up at 54.5 cents.
