Dyna-Mac Holding (DMH) reported a strong set of 3Q12 results, with net profit jumping by 250% YoY to S$10.2m. The results were within our expectations; 9MFY12 net profit formed about 74% of our full year estimates. During the quarter, revenue and gross profit increased by 157% and 173% YoY to S$59.8m and S$19.7m respectively, mainly due to more on-going projects and recognition of certain variation orders. Meanwhile, we note that the FPSO industry dynamics remains robust. Backlog of orders for floating production systems has now increased to a record 74 units as of July 2012, surpassing the previous peak of 67 units in Nov 2007. We feel that DMH is well prepared to capture a larger slice of the new orders. It has increased its production capacity with two yard acquisitions and raised S$45.7m in a recent placement to support its increased working capital needs. Maintain BUY with unchanged S$0.57 fair value estimates.
Stellar 3Q12 results
Dyna-Mac Holding (DMH) reported a strong set of 3Q12 results, with net profit jumping by 250% YoY to S$10.2m. The results were within our expectations; 9MFY12 net profit formed about 74% of our full year estimates. During the quarter, revenue and gross profit increased by 157% and 173% YoY to S$59.8m and S$19.7m respectively, mainly due to more on-going projects and recognition of certain variation orders. Administrative expenses increased by 88% YoY to S$7.5m due increased headcounts as it cope with bigger business volume.
Robust industry fundamentals
Meanwhile, we note that the FPSO industry fundamentals remains robust, underpinned by strong global oil demand despite the recent economic uncertainties. According to International Maritime Associates (IMA), the backlog of orders for floating production systems has now increased to a record 74 units as of July 2012 (April 2012: 66 units), surpassing the previous peak of 67 units in Nov 2007. This continues the upward cycle that began in 2H2009. In terms of fabrication, Asia remains the dominant location, accounting for 45% of the facilities active in the industry.
Well-prepared!
We believe DMH is well-prepared to capture a larger slice of the new orders. Over the past six months, the group has (i) acquired a fabrication yard in Guangzhou of approx 100,000 sqm and (ii) rented an additional yard in Johor with about 211,000 sqm. With these new yards, it should be able to ramp up its annual production capacity to 45,000 tons, up from 25,000 tons a year ago. It also recently raised another S$45.7m from a recent placement, which should help support the increased working capital requirements for the new yards. We adjusted our model for 3Q12 results, but prefer to keep our fair value estimate unchanged at S$0.57. Maintain BUY.
Dyna-Mac Holding (DMH) reported a strong set of 3Q12 results, with net profit jumping by 250% YoY to S$10.2m. The results were within our expectations; 9MFY12 net profit formed about 74% of our full year estimates. During the quarter, revenue and gross profit increased by 157% and 173% YoY to S$59.8m and S$19.7m respectively, mainly due to more on-going projects and recognition of certain variation orders. Administrative expenses increased by 88% YoY to S$7.5m due increased headcounts as it cope with bigger business volume.
Robust industry fundamentals
Meanwhile, we note that the FPSO industry fundamentals remains robust, underpinned by strong global oil demand despite the recent economic uncertainties. According to International Maritime Associates (IMA), the backlog of orders for floating production systems has now increased to a record 74 units as of July 2012 (April 2012: 66 units), surpassing the previous peak of 67 units in Nov 2007. This continues the upward cycle that began in 2H2009. In terms of fabrication, Asia remains the dominant location, accounting for 45% of the facilities active in the industry.
Well-prepared!
We believe DMH is well-prepared to capture a larger slice of the new orders. Over the past six months, the group has (i) acquired a fabrication yard in Guangzhou of approx 100,000 sqm and (ii) rented an additional yard in Johor with about 211,000 sqm. With these new yards, it should be able to ramp up its annual production capacity to 45,000 tons, up from 25,000 tons a year ago. It also recently raised another S$45.7m from a recent placement, which should help support the increased working capital requirements for the new yards. We adjusted our model for 3Q12 results, but prefer to keep our fair value estimate unchanged at S$0.57. Maintain BUY.
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