Dyna-Mac Holdings looks set for a busy year ahead in 2014, buoyed by improving prospects in the FPSO market and a robust net order book of S$346m (as at 13 Nov 2013), thanks to YTD order wins of ~S$320m. There are positive developments happening for its major customers; while Dyna-Mac is also actively pursuing six to seven FPSO projects which it is confident of winning. If successful, this may culminate in healthy order wins amounting to ~S$280-350m for FY14, according to our estimates. We update our model and assumptions following a change in analyst coverage; and now forecast revenue and PATMI growth of 20%/-7% for FY13 and 4%/15% for FY14, respectively. Rolling forward our valuations to 16x FY14F EPS, we derive a higher fair value estimate of S$0.47 (previously S$0.44). Upgrade Dyna-Mac from Hold to BUY.
A bustling year ahead in 2014 for Dyna-Mac
Dyna-Mac Holdings looks set for a busy year ahead in 2014, buoyed by improving prospects in the Floating, Production, Storage and Offloading (FPSO) market and a robust net order book of S$346m (as at 13 Nov 2013), thanks to YTD order wins of ~S$320m. Based on our understanding, Dyna-Mac is currently actively pursuing six to seven FPSO projects which it is confident of winning. If successful, this may culminate in healthy order wins amounting to ~S$280-350m for FY14, according to our estimates.
Positive developments for major customers
Bumi Armada Berhad (BAB), one of Dyna-Mac’s top three customers, was recently awarded a Letter of Intent from EnQuest for the Kraken FPSO project. Upon confirmation of this contract, BAB will award the FPSO conversion project to Keppel Corp and the topside modules fabrication orders to Dyna-Mac, as mentioned by BAB’s management during its 3Q13 analyst conference call. During the call, BAB also highlighted that it has emerged as the winner of the Madura FPSO bid in Indonesia, although it still needs to obtain regulatory approval from Indonesia’s SKK Migas. There are also positive developments at another of Dyna-Mac’s major customer, SBM Offshore, which nailed US$7.5b of orders in 1H13, driven largely by two FPSO awards from Petrobras in Mar (of which Dyna-Mac will supply topside modules to). SBM Offshore also sees strong demand for FPSOs and associated products in the medium term with an encouraging pipeline of projects.
Upgrade to BUY
We update our model and assumptions following a change in analyst coverage; and now forecast revenue and PATMI growth of 20%/-7% for FY13 and 4%/15% for FY14, respectively. Maintaining our target PER peg of 16x (approximately 0.25 standard deviation below its historical average forward PER to account for possible delays in global FPSO tenders) and rolling forward our valuations to FY14F EPS, our fair value estimate is raised from S$0.44 to S$0.47. Coupled with a prospective FY13F dividend yield of 5%, we upgrade Dyna-Mac from Hold to BUY.
Dyna-Mac Holdings looks set for a busy year ahead in 2014, buoyed by improving prospects in the Floating, Production, Storage and Offloading (FPSO) market and a robust net order book of S$346m (as at 13 Nov 2013), thanks to YTD order wins of ~S$320m. Based on our understanding, Dyna-Mac is currently actively pursuing six to seven FPSO projects which it is confident of winning. If successful, this may culminate in healthy order wins amounting to ~S$280-350m for FY14, according to our estimates.
Positive developments for major customers
Bumi Armada Berhad (BAB), one of Dyna-Mac’s top three customers, was recently awarded a Letter of Intent from EnQuest for the Kraken FPSO project. Upon confirmation of this contract, BAB will award the FPSO conversion project to Keppel Corp and the topside modules fabrication orders to Dyna-Mac, as mentioned by BAB’s management during its 3Q13 analyst conference call. During the call, BAB also highlighted that it has emerged as the winner of the Madura FPSO bid in Indonesia, although it still needs to obtain regulatory approval from Indonesia’s SKK Migas. There are also positive developments at another of Dyna-Mac’s major customer, SBM Offshore, which nailed US$7.5b of orders in 1H13, driven largely by two FPSO awards from Petrobras in Mar (of which Dyna-Mac will supply topside modules to). SBM Offshore also sees strong demand for FPSOs and associated products in the medium term with an encouraging pipeline of projects.
Upgrade to BUY
We update our model and assumptions following a change in analyst coverage; and now forecast revenue and PATMI growth of 20%/-7% for FY13 and 4%/15% for FY14, respectively. Maintaining our target PER peg of 16x (approximately 0.25 standard deviation below its historical average forward PER to account for possible delays in global FPSO tenders) and rolling forward our valuations to FY14F EPS, our fair value estimate is raised from S$0.44 to S$0.47. Coupled with a prospective FY13F dividend yield of 5%, we upgrade Dyna-Mac from Hold to BUY.
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