Dyna-Mac Holdings reported a 49.5% YoY drop in revenue to S$39.8m and a 76.0% drop in net profit to S$1.7m in 1Q15. However, if we were to exclude one-off items such as a S$2.6m fair value loss on derivative financial instruments, we estimate core PATMI to be about S$4.3m in the quarter. Still, this formed only 13% of ours and the street’s full year figure, and is below expectations. Looking ahead, we expect 2Q to be relatively soft too, with some recovery starting in 3Q. Meanwhile, the market is also likely to focus on new order flow and the margins at which they are secured at. We lower our earnings estimates by 23/26% for this year and next, such that our fair value estimate is revised from S$0.35 to S$0.27. Maintain HOLD.
Soft 1Q15 results
Dyna-Mac Holdings reported a 49.5% YoY drop in revenue to S$39.8m and a 76.0% drop in net profit to S$1.7m in 1Q15. However, if we were to exclude one-off items such as a S$2.6m fair value loss on derivative financial instruments, we estimate core PATMI to be about S$4.3m in the quarter. Still, this formed only 13% of ours and the street’s full year figure, and is below expectations. The S$2.6m fair value loss on derivative financial instruments relates to fair value adjustment on hedging contracts due to mark-to-market adjustments on foreign currency forward contracts. The SGD weakened against the USD in 4Q14 and 1Q15, resulting in fair value losses in both quarters. With a reversal in trend in 2Q15, there should be some fair value gains in the upcoming results.
2Q15 may be a little weak too; recovery in 2H15
The lower revenue in 1Q15 was mainly due to the timing in revenue recognition of projects in the Dyna-Mac’s yards in Singapore as well as the lower activity levels in the group’s overseas yards with most projects still in the initial stage of production. There was also a delay in a project that pushed back recognition. Looking ahead, we expect 2Q to be relatively soft too, with some recovery starting in 3Q.
Focusing on new order flows
Dyna-Mac has a net order book of S$349m with deliveries extending into 2016, and this includes S$149m in new orders secured YTD. The market is, however, likely to focus on new order flow and the margins at which they are secured at. With the recent oil price rout, there could be margin pressure for new orders as oil and gas companies seek to negotiate for lower-priced contracts. Meanwhile, the group will seek to improve its operational efficiency and expand its product capabilities. We lower our earnings estimates by 23/26% for this year and next, such that our fair value estimate is revised from S$0.35 to S$0.27. Maintain HOLD.
Dyna-Mac Holdings reported a 49.5% YoY drop in revenue to S$39.8m and a 76.0% drop in net profit to S$1.7m in 1Q15. However, if we were to exclude one-off items such as a S$2.6m fair value loss on derivative financial instruments, we estimate core PATMI to be about S$4.3m in the quarter. Still, this formed only 13% of ours and the street’s full year figure, and is below expectations. The S$2.6m fair value loss on derivative financial instruments relates to fair value adjustment on hedging contracts due to mark-to-market adjustments on foreign currency forward contracts. The SGD weakened against the USD in 4Q14 and 1Q15, resulting in fair value losses in both quarters. With a reversal in trend in 2Q15, there should be some fair value gains in the upcoming results.
2Q15 may be a little weak too; recovery in 2H15
The lower revenue in 1Q15 was mainly due to the timing in revenue recognition of projects in the Dyna-Mac’s yards in Singapore as well as the lower activity levels in the group’s overseas yards with most projects still in the initial stage of production. There was also a delay in a project that pushed back recognition. Looking ahead, we expect 2Q to be relatively soft too, with some recovery starting in 3Q.
Focusing on new order flows
Dyna-Mac has a net order book of S$349m with deliveries extending into 2016, and this includes S$149m in new orders secured YTD. The market is, however, likely to focus on new order flow and the margins at which they are secured at. With the recent oil price rout, there could be margin pressure for new orders as oil and gas companies seek to negotiate for lower-priced contracts. Meanwhile, the group will seek to improve its operational efficiency and expand its product capabilities. We lower our earnings estimates by 23/26% for this year and next, such that our fair value estimate is revised from S$0.35 to S$0.27. Maintain HOLD.
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