Dyna-Mac Holdings Ltd (DMHL) recently completed a placement of up to 139.5m ordinary shares, consisting of (i) 93m new shares issued and (ii) 46.5m vendor shares owned by current CEO Mr. Desmond Lim, at S$0.50 per share. This enlarges DMHL’s existing share capital would by about 10%. Mr. Desmond Lim is still the largest shareholder with a 40.8% stake (previously: 49.9%). The net proceeds of S$45.7m from issuance of new shares will be used for working capital purposes. We continue to like DMHL for its prudent management style and its exposure to the FPSO topside market. After adjusting for the new shares, our fair value drops to S$0.57 (previously S$0.62). Maintain BUY.
139.5m placement shares
Dyna-Mac Holdings Ltd (DMHL) recently completed a placement of up to 139.5m ordinary shares, consisting of (i) 93m new shares issued and (ii) 46.5m vendor shares owned by current CEO Mr. Desmond Lim, at S$0.50 per share. This enlarges DMHL’s existing share capital by about 10%. Mr. Desmond Lim is still the largest shareholder with a 40.8% stake (previously: 49.9%), followed by Keppel Corp with 24.4% (previously: 26.9%). According to the group, net proceeds of S$45.7m from the issuance of new shares will be used for working capital purposes.
Funding for more projects?
We believe that the new proceeds will be used to fund working capital requirements for its expanded production output. Recall that DMHL has been operating at close to full utilization in the past quarter and recently expanded its production output capacity to 45,000 tons, up from 25,000 tons a year ago. With the sharp increase in output, the group is likely to need additional financing for its fabrication contracts.
No change in management control
We are also not overly concerned about the placement of vendor shares. DMHL founder and current CEO Mr Desmond Lim, 54, may have legitimate reasons to diversify his personal wealth. In any case, he remains the largest shareholder with 40.8% stake post-placement and is still very much involved in running the business.
FV lowers to S$0.57
We continue to like DMHL for its prudent management style and its exposure to the FPSO topside market. The group is also optimistic of its order outlook over the medium term. We adjusted our model for the new shares and lowered our fair value estimate to S$0.57 (previously S$0.62), still on 12x PER (for FY13F EPS). Maintain BUY.
Dyna-Mac Holdings Ltd (DMHL) recently completed a placement of up to 139.5m ordinary shares, consisting of (i) 93m new shares issued and (ii) 46.5m vendor shares owned by current CEO Mr. Desmond Lim, at S$0.50 per share. This enlarges DMHL’s existing share capital by about 10%. Mr. Desmond Lim is still the largest shareholder with a 40.8% stake (previously: 49.9%), followed by Keppel Corp with 24.4% (previously: 26.9%). According to the group, net proceeds of S$45.7m from the issuance of new shares will be used for working capital purposes.
Funding for more projects?
We believe that the new proceeds will be used to fund working capital requirements for its expanded production output. Recall that DMHL has been operating at close to full utilization in the past quarter and recently expanded its production output capacity to 45,000 tons, up from 25,000 tons a year ago. With the sharp increase in output, the group is likely to need additional financing for its fabrication contracts.
No change in management control
We are also not overly concerned about the placement of vendor shares. DMHL founder and current CEO Mr Desmond Lim, 54, may have legitimate reasons to diversify his personal wealth. In any case, he remains the largest shareholder with 40.8% stake post-placement and is still very much involved in running the business.
FV lowers to S$0.57
We continue to like DMHL for its prudent management style and its exposure to the FPSO topside market. The group is also optimistic of its order outlook over the medium term. We adjusted our model for the new shares and lowered our fair value estimate to S$0.57 (previously S$0.62), still on 12x PER (for FY13F EPS). Maintain BUY.
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