$Dyna-Mac (NO4.SG)$ Maybank Securities raised its target pri...

Maybank Securities raised its target price on Dyna-Mac after the offshore oil and gas contractor said it expects a "significant improvement" in net profit for the first half of 2024.

On Fri (Jul 19), analyst Jarrick Seet lifted the stock's target price to S$0.62 from S$0.52, after raising profit after tax and minority interests forecasts for FY2024 and FY2025 by 37% and 38%, respectively.

The revised target price is based on an estimated price-to-earnings ratio for FY2024 of 13 times.

Dyna-Mac's higher earnings estimates came as major projects were completed, and productivity and revenue logged gains.

Seet retained his "buy" call on the counter, as he expects the company to continue benefiting from strong demand for floating production storage and offloading (FPSO) units.

He also highlighted that the brokerage might have been "too conservative" with Dyna-Mac's margins.

Noting that Dyna-Mac's order book doubled to S$896 million within the last year and it expanded its capacity by 50%, Seet is positive that the company will execute its order book at a faster pace.

He believes the contractor could benefit from better pricing of new FPSO units, which would improve margins.

As a result, Seet now projects a higher gross margin of 19%, compared to the previous estimate of 17%. He added that Dyna-Mac should be further re-rated as it fulfils its larger-sized contracts and achieves a better bottom line.

Additionally, Seet said Dyna-Mac could benefit from the addition of substantial shareholder Hanwha Aerospace and Ocean.

In May, Hanwha Aerospace and Ocean bought Keppel's entire stake in Dyna-Mac for S$100 million. Keppel's stake accounted for 23.9% of the contractor's issued share capital and comes up to a market value of about S$90 million based on the sale shares on May 9.

Hanwha Ocean – the shipbuilding arm of Hanwha Group – bought 21.5% of Dyna-Mac's shares, while the group's other subsidiary, Hanwha Aerospace, holds the remaining 2.4%.

"We believe Hanwha Ocean may be on a global expansion drive, as it looks to grow its footprint in marine energy solutions and shipbuilding," said Seet.