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Maybank ups Dyna-Mac’s target price to 62 cents following ‘positive profit alert’

22 Jul 2024

Maybank Securities analyst Jarrick Seet has lifted his target price estimate on Dyna-Mac to 62 cents from 52 cents. Seet had upped his target price to 52 cents in his last report dated June 19, from 46 cents before. “With its positive profit alert, we continue to believe we were too conservative with Dyna-Mac’s margins,” the analyst writes in his July 19 report. On July 5, Dyna-Mac said that it expects to report a “significant improvement” in its net profit for the 1HFY2024 ended June 30, compared to the same period the year before. The net profit increase is mainly due to the completion of major projects, improved productivity and higher revenue, said Dyna-Mac in its statement. With Dyna-Mac’s orderbook doubling to $896 million and with its new land expansion of 50%, Seet expects the company to execute its orders at a faster pace. From his channel checks, builders of floating production storage and offloading (FPSO) vessels enjoy better prices for each FPSO new-build. As such, Seet believes this should flow down to players like Dyna-Mac, thereby leading to better margins for the company’s new orders won. The analyst now estimates Dyna-Mac’s module business to see a higher gross margin of 19% compared to 17% previously. Dyna-Mac’s new substantial shareholder, Hanwha Aerospace & Ocean, should be a “positive addition” as well, Seet says. The South Korean conglomerate bought Keppel’s stake in Dyna-Mac in May this year, adding to its 2.95% stake that it purchased before. “We believe Hanwha Ocean may be on a global expansion drive, as it looks to grow its footprint in marine energy solutions and shipbuilding. It also launched a bid for Australian shipbuilder Austal back in April 2024 for US$662 million ($890.4 million),” the analyst notes. Seet has kept his “buy” call on Dyna-Mac as he expects the company to benefit from the current strong demand for FPSOs. The company’s shares should also re-rate further as it executes its larger-size contracts and achieves higher profitability, he adds. “Dyna-Mac is a key beneficiary of the multi-year FPSO upcycle and remains one of our top picks in the small and mid-cap space,” he writes. In addition to his higher target price, Seet has increased his patmi estimates by 37% for FY2024 and by 38% for FY2025. Dyna-Mac will report its results for the 1HFY2024 after trading hours on Aug 6. As at 12.02pm, shares in Dyna-Mac are trading 0.5 cents higher or 1.02% up at 49.5 cents.