The estate of Dyna-Mac’s founding shareholder, Desmond Lim Tze Jong, says Hanwha’s offer price of 60 cents per share “does not adequately reflect” Dyna-Mac’s value and growth potential after its transformation into a global multi-disciplinary contractor. The offer is also not aligned with Lim’s aspirations of growing the group to its present status as a global multi-disciplinary contractor with diversified businesses today.
Lim, who was the executive chairman and CEO of Dyna-Mac, passed away unexpectedly on Oct 26, 2019, at 61. The estate is Dyna-Mac’s single largest shareholder.
In its statement dated Sept 23, the estate notes that Dyna-Mac saw a “significant transformation” after the Covid-19 pandemic and is “very well-positioned” for strong growth in the years ahead.
As at 1HFY2024 ended June 30, Dyna-Mac has a net order book of $681.3 million with deliveries scheduled through to FY2026.
“The Estate believes that Dyna-Mac is poised to secure further order book given the addition of its new yard facilities,” reads the statement.
“Continuing the legacy of the founder and founding shareholders of Dyna-Mac, the Estate has held a long-term interest in the business and stayed committed with the group through the most challenging of times including cyclical downturns, energy crises and Covid-19, and did not veer from its belief in the true potential of the group,” says Lim’s estate.
“Dyna-Mac, with its high net-cash position, potential dividends and higher potential profitability in the next few years, coupled with the robust outlook for floating production storage and offloading (FPSOs), is definitely worth more than 60 cents per share,” it adds. “The Estate is not opposed to proposed offers for Dyna-Mac, but like all shareholders, it strongly believes that any offer must be compelling and reflect the true value of Dyna-Mac.”
On Sept 11, Korean-listed Hanwha Group made a tender offer of 60 cents per share in Dyna-Mac for all the shares it does not own. The offer price represents a 21.2% premium to Dyna-Mac’s last-traded price of 49.5 cents on Sept 10. It also represents a premium of 6.2%, 14.1%, 29.3% and 50% to the volume-weighted average price (VWAP) for the one-, three-, six- and 12-month trading period in Dyna-Mac’s shares.
'Wait and see', say analysts
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So far, analysts from Maybank Securities, OCBC Investment Research (OIR) and Lim & Tan Securities have recommended investors "wait and see". All three analysts have a "buy" call on the company.
Maybank's Jarick Seet notes that the offer is "fair" but is on the lower end of the fair value range.
"Given this is not a final offer, we think it would be better for investors to wait for a revised offer that is either closer or higher than our target price of 64 cents," says Seet in his Sept 12 report. "Our confidence stems from the robust outlook for FPSOs, Dyna-Mac’s high net cash position, potential dividends and higher projected profitability in the next few years."
OIR's Ada Lim, who has a fair value estimate of 66.5 cents on Dyna-Mac, feels that the offer price "does not fully reflect" Dyna-Mac's true value. She also does not recommend investors accept the tender offer.
Instead, Lim recommends existing investors consider exercising their warrants to avoid dilution and to participate in the company’s future growth.
Lim & Tan Securities' Nicholas Yon notes that the offer price is below the consensus target price range of 64 cents to 71.5 cents. Yon's target price is 71.5 cents.
As the offer is not final, investors should wait for a potentially better offer price, says Yon.
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He adds that Dyna-Mac's turnaround is thanks to its current CEO, Lim Ah Cheng (AC Lim), and his team.
"AC is prudent and straightforward and honest and he represents a significant key man risk for Dyna-Mac, given his pivotal role in the company's success," Yon writes.
The Edge Singapore's analyst, Thiveyen Kathirrasan, notes that Hanwha's offer is "fair". Based on his calculations, which look at several factors such as the FPSO industry, carbons capture and storage industry and hydrogen industry that may affect the outlook of the business, Dyna-Mac's intrinsic value is 61 cents.
In his view, any offer between 55 cents to 66 cents is a fair offer. Including the environmental, social and governance (ESG) discount, an offer closer to 55 cents would also be fair, he adds.
As at 2.48pm, shares in Dyna-Mac are trading 0.5 cents lower or 0.79% down at 62.5 cents. At its close of 63 cents on Sept 23, Dyna-Mac is trading at a P/E of 11.48 times, compared to its peers' average P/E of 21.54 times, per figures derived from Bloomberg.
See also:
- Hanwha Group makes tender offer of 60 cents per share for Dyna-Mac (update)
- ZICO Capital appointed as IFA for Dyna-Mac's offer
- Hanwha Group explains rationale behind Dyna-Mac’s offer price
- Standoff as Hanwha keeps 60 cents offer price for Dyna-Mac in offer document
- Estate of Dyna-Mac’s founding shareholder issues follow-up statement after offer document
- Hanwha Group announces ‘final offer’ of 67 cents for Dyna-Mac (update)
- Dyna-Mac’s IFA deems offer to be ‘fair and reasonable’
- Estate of Dyna-Mac’s founding shareholder to accept Hanwha’s offer
- Hanwha Group's offer for Dyna-Mac turns unconditional with acceptances; offer to remain open till Nov 20
- CCCS clears proposed acquisition of Dyna-Mac by Hanwha Ocean
- Hanwha to exercise compulsory acquisition rights after stake in Dyna-Mac crosses 90%
