Dyna-Mac Holdings reported a 4.6% YoY drop in revenue to S$62.9m and a 56.6% drop in net profit to S$4.0m in 4Q14, bringing FY14 net profit to S$24.8m. However, excluding one-off items, we estimate core PATMI to be about S$7.5m in the quarter and S$29m for the full year, in line with expectations. Looking ahead, the group is still positive on order wins in 2015 despite lower oil prices, as it services the production stage of the oil and gas value chain. However, there could be margin pressure for new orders. With the de-rating of the broader sector, we deem it necessary to lower the P/E for Dyna-Mac from 15x to 11x. Based on FY15 earnings, our fair value estimate drops from S$0.445 to S$0.35, and given the limited upside potential, we downgrade our rating on the stock to HOLD. A final dividend of S$0.015/share has been declared, translating to a dividend yield of about 4.4%.
FY14 results in line
Dyna-Mac Holdings reported a 4.6% YoY drop in revenue to S$62.9m and a 56.6% drop in net profit to S$4.0m in 4Q14, bringing FY14 net profit to S$24.8m. However, if we were to exclude one-off items such as a S$3.8m fair value loss on derivative financial instruments, we estimate core PATMI to be about S$7.5m in the quarter and S$29m for the full year, in line with expectations.
Receives healthy enquiries but margin pressure ahead
Looking ahead, the group is still upbeat on order wins in 2015 despite lower oil prices, as it services the production stage of the oil and gas value chain. However, we believe the group will not be immune to the industry slowdown. With the recent oil price rout, there could also be margin pressure for new orders as oil and gas companies seek to negotiate for lower-priced contracts. Meanwhile, the group has a net order book of S$354m with deliveries extending into 2016, and about 60-70% of this is expected to be recognised in FY15. For longer-term growth, there may be a possibility of securing work involving FLNG modules.
Lowering P/E with de-rating of sector
With the de-rating of the broader sector, we deem it necessary to lower the P/E for Dyna-Mac from 15x to 11x; we still ascribe a higher-than-industry average P/E for the group, though lower than its 3-year historical average of ~12x due to 1) the pipeline of upcoming FPSO-related work, 2) its strong execution record, 3) established relationships with major FPSO players, and 4) close relationship with Keppel. A final dividend of S$0.015/share has been declared, translating to a dividend yield of about 4.4%. This was lower than S$0.02/share in FY13, as the group now seeks to conserve cash for taking on bigger jobs in the future. Based on FY15 earnings, our fair value estimate drops from S$0.445 to S$0.35, and given the limited upside potential, we downgrade our rating on the stock to HOLD.
Dyna-Mac Holdings reported a 4.6% YoY drop in revenue to S$62.9m and a 56.6% drop in net profit to S$4.0m in 4Q14, bringing FY14 net profit to S$24.8m. However, if we were to exclude one-off items such as a S$3.8m fair value loss on derivative financial instruments, we estimate core PATMI to be about S$7.5m in the quarter and S$29m for the full year, in line with expectations.
Receives healthy enquiries but margin pressure ahead
Looking ahead, the group is still upbeat on order wins in 2015 despite lower oil prices, as it services the production stage of the oil and gas value chain. However, we believe the group will not be immune to the industry slowdown. With the recent oil price rout, there could also be margin pressure for new orders as oil and gas companies seek to negotiate for lower-priced contracts. Meanwhile, the group has a net order book of S$354m with deliveries extending into 2016, and about 60-70% of this is expected to be recognised in FY15. For longer-term growth, there may be a possibility of securing work involving FLNG modules.
Lowering P/E with de-rating of sector
With the de-rating of the broader sector, we deem it necessary to lower the P/E for Dyna-Mac from 15x to 11x; we still ascribe a higher-than-industry average P/E for the group, though lower than its 3-year historical average of ~12x due to 1) the pipeline of upcoming FPSO-related work, 2) its strong execution record, 3) established relationships with major FPSO players, and 4) close relationship with Keppel. A final dividend of S$0.015/share has been declared, translating to a dividend yield of about 4.4%. This was lower than S$0.02/share in FY13, as the group now seeks to conserve cash for taking on bigger jobs in the future. Based on FY15 earnings, our fair value estimate drops from S$0.445 to S$0.35, and given the limited upside potential, we downgrade our rating on the stock to HOLD.
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