Maybank Securities analyst Jarick Seet is keeping his &ldquo buy&rdquo call on Dyna-Mac at a maintained target price of 38 cents.

 

In his Feb 5 report, the analyst notes that the company will likely end the year or FY2023 ended Dec 31, 2023, with an estimated revenue of $367 million and net profit after tax (NPAT) of $20.7 million, representing 28.4% y-o-y earnings per share (EPS) growth. 

 

&ldquo Most importantly, we expect stronger FY2024 growth as it grew capacity by 50% to 60%. We expect cost savings from lower logistics and warehousing expenses to be enough to cover the recent acquisition, which cost US$8.25 million ($11 million),&rdquo writes the analyst.

 

Additionally, he expects order wins of $200 million to $400 million by 1HFY2024, which could potentially lift Dyna-Mac' s as at Oct 2, 2023, orderbook of $630.7 million.

 

&ldquo As floating production storage and offloading (FPSO) charter rates are still rising and with FPSO orders in the pipeline, we expect Dyna-Mac to continue to benefit significantly from this trend,&rdquo adds Seet, who expects the company to secure $200 million to $400 million more orders by 1HFY2024.

 

Meanwhile, following the leasing of land from JTC and subsequent expansion, Dyna-Mac has signalled its intent to acquire Exterran Offshore, which comes with about 4.5 hectares of yard facilities, next to its main facility with lease until 2030.

 

The acquisition will extend the company&rsquo s waterfront length by 680 metres, with a net cost of US$6.1 million, equivalent to about US$1.02 million annually.

 

&ldquo We understand that Dyna-Mac previously used third-party warehousing due to the lack of capacity and this incurred additional logistics costs. We expect cost savings to easily cover the US$1.02 million a year for the acquisition. It will also re-organise the layout of the entire facility, which should help lift operating efficiency,&rdquo writes Seet.

 

&ldquo We believe [an] increase in capacity through this acquisition signals management&rsquo s bullishness of winning new orders, which would likely lead to higher revenue and profits. Dyna-Mac remains one of our top small and mid-caps (SMID) conviction picks,&rdquo he adds.

 

Seet forecasts Dyna-Mac to post a strong organic earnings growth of at least 30% compound annual growth rate (CAGR) for the next two years, riding on the boom of the oil and gas (O& G) industry, winning larger contracts and boosting its revenue and already-high order book, as well as growing inorganically through acquisitions.

 

Conversely, downside risks for the company include the decline in oil prices, which will reduce its investments in the O& G space. Other risks include higher labour costs which will reduce margins, and new competitors entering the industry, which could temporarily reduce Dyna-Mac&rsquo s market share.

Maybank Securities analyst Jarick Seet is keeping his &ldquo buy&rdquo call on Dyna-Mac at a maintained target price of 38 cents.

In his Feb 5 report, the analyst notes that the company will likely end the year or FY2023 ended Dec 31, 2023, with an estimated revenue of $367 million and net profit after tax (NPAT) of $20.7 million, representing 28.4% y-o-y earnings per share (EPS) growth. 

&ldquo Most importantly, we expect stronger FY2024 growth as it grew capacity by 50% to 60%. We expect cost savings from lower logistics and warehousing expenses to be enough to cover the recent acquisition, which cost US$8.25 million ($11 million),&rdquo writes the analyst.

https://www.theedgesingapore.com/capital/brokers-calls/dyna-mac-expand-facilities-acquisition-exterran-offshore