Dyna-Mac Holdings

OCBC on 25 June 2012

Dyna-Mac Holdings Ltd (DMH) provides engineering, procurement and construction services to the offshore oil & gas industry. Its principal activities are the fabrication and assembly of topside modules for FPSO and FSO in Singapore. Having delivered more than 154 topside modules, the group has established itself as a specialist its field. DMH’s main yard has a waterfront shoreline and is integrated with a load-out bay. This enables completed topside modules to be easily transported to nearby shipyards for installation onto an FPSO. We value DMH at 10x blended FY12-13F earnings estimate and obtain a fair value estimate of S$0.34. Initiate with HOLD.

FPSO Fabricator
Dyna-Mac Holdings Ltd (DMH) provides engineering, procurement and construction services to the offshore oil & gas industry. Its principal activities are the fabrication and assembly of topside modules for FPSO and FSO in Singapore. Other activities include ad-hoc general engineering and fabrication projects for specialized structures and semi-submersibles and sub-sea products such as manifolds, buoys, process piping and tanks.

Good Track Record
Having delivered more than 154 topside modules, the group has established itself as a specialist in the fabrication and assembly of topside FPSO and FSO modules. We think that its track record of consistent execution and timely delivery of products would help it secure more contracts in the future.

Integrated sea front yard facilities
DMH’s main yard has an uninterrupted waterfront shoreline and is integrated with a load-out bay. This enables completed topside modules to be easily transported to nearby shipyards for installation onto an FPSO. Besides time savings, the close proximity also implies lower risks and closer collaboration between shipyards. Due to the difficulties in securing waterfront land, we believe its main yard provide it with a key competitive advantage against its competitors.

Revenue and earnings to rebound in FY12-13F
After a weaker-than expected financial performance in FY11, we believe that DMH’s revenue and earnings will rebound in FY12-13F. This is because its order-book is at an all-time high (S$201m as of 20 Apr 2012) and the majority of its projects are expected to be completed by end FY12F. We value DMH at 10x blended FY12-13F earnings estimate and obtain a fair value estimate of S$0.34. Initiate with HOLD.