CGS-CIMB starts Dyna-Mac at Add as proxy to FPSO upswing

Singapore five-dollar note Photo by Leslie Shaffer

CGS-CIMB started Dyna-Mac at Add, with a target price of S$0.18.

“Given the better financial footing now, we believe DMHL’s risk-reward is skewed to the upside,” the Wednesday note said. “We believe small/mid cap stocks with healthy balance sheets (net cash/minimal net gearing) may be accorded a premium to peers in a sector upturn, hence we are slightly more bullish on its potential share price recovery prospects.”

It noted Dyna-Mac fabricates topside modules for floating production storage and offloading (FPSO) and floating production storage (FPS) vessels, as well as specialised structures for semi-submersibles and sub-sea products.

Management guided that at least S$500 million worth of module work up for bids, the note said, adding that Dyna-Mac had contract wins of around S$101 million in 2017, up from 2016’s S$13 million.

CGS-CIMB said it estimated 2018, 2019 and 2020 revenue at S$100 million, S$150 million and S$160 million respectively, with around 90 percent of 2018 revenue already secured.

”We believe Dyna-Mac could secure at least 30 percent of its current bids, given its strong track record in topside module fabrication,” the note said.

It noted that it estimated 2018 losses should narrow to S$3.5 million, amid caution over the contract pipeline for the fourth quarter of this year, but it expected a return to net profit in 2019-2020 of S$5.8 million to S$8.1 million.

CGS-CIMB also noted that Keppel is a substantial shareholder with a 24.4 percent stake in Dyna-Mac, and that the company also historically won topside contracts which were Keppel’s conversion jobs. It added that it suspected that it was partly due to Dyna-Mac’s main facilities are close to Keppel Shipyard’s yard.

The stock was up 9.23 percent at S$0.142 at 10:35 A.M. SGT on Thursday.