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FPSO pipeline for Dyna-Mac looks encouraging but competition is heating up

SINGAPORE (Aug 31): Dyna-Mac Holdings, the engineering, procurement, and construction services provider to the marine construction and offshore oil & gas industries, reversed out of the red in 1H18 with earnings of $1.21 million, compared to a loss of $22.2 million in 1H17.

2Q18 saw earnings of $1.04 million, compared to a loss of $12.5 million in 2Q17.

Revenue for 1H18 more than quadrupled to $59.8 million from $13.5 million last year, which made up 60% of CGS-CIMB’s full-year forecast.

The research house also has maintained its “buy” call on Dyna-Mac with a lowered target price of 13 cents.

The group’s gross profit margin (GPM) of 18% was below CGS-CIMB’s 19% estimate but higher revenue mitigated the bottomline impact.

As at end-June, the group was still in a net cash position of 2.6 cents per share. The management guided that the assets earmarked for sale ($32 million), are still pending approval.

In a Thursday report, analyst Cezzane See says, “This asset sale could lift DMHL’s net cash position further and provide it the stability to ride out delays in order wins, in our view.”

In addition, ExxonMobil announced that the Liza Phase 2 FID earlier in July. There was also news from Upstream Online that the group was bidding for the topside fabrication work of Petrobras’s Buzios-5 FPSO.

Compared to the Liza 1, both projects have larger production capabilities.

Meanwhile, Clarksons said that 33 floating production, storage and offloading vessel (FPSO) and floating liquefied natural gas unit (FLNG) projects worth US$25 billion in total could be awarded in CY18-20F (excluding redeployment awards).

Although the group’s FPSO pipeline looks encouraging, competition remains keen with more Chinese names emerging in FY18.

“We believe this keen competition is one of the reasons why GPM is still under pressure,” says See, who has turned conservative and reduced GPM estimates.

“Our thesis for DMHL is that its cleaner balance sheet improves its operating leverage when contract wins emerge but, given the stiff competition, this could take longer than expected,” adds See.

As at 3.35pm, shares in Dyna-Mac are trading at 11 cents or 1.11 times FY18 book.


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