"We expect further contract wins, margin expansion and increased revenues and profitability for Dyna-Mac in FY2024 and FY25 as it continues to ride the oil and gas industry upcycle," says Yon.
According to Yon, the strong demand for Dyna-Mac’s topside module fabrication is likely to persist given increased capital expenditure coming through in the O&G sector.
"Given Dyna-Mac’s recent acquisition of more land space to support its operations and a likely super cycle in the O&G sector, we expect Dyna-Mac to win even more contracts moving forward," he says.
According to Yon, Dyna-Mac is trading at an "undemanding valuation" of 10.3x PE, or 4.2x, excluding cash. In contrast, peers trade at an average of 19.5x. As Dyna-Mac is asset-light, its price to book is high at 5.3x but the strong ROE of 41% makes up for it.
Yon also notes that following its "remarkable" turnaround in FY2023, the company has reinstated dividend payments at a "commendable" ratio of 23% to 30%. By extrapolating from this trend, Dyna-Mac is seen to pay 0.94 cents for the current FY2024, translating to a dividend yield of 2.6%.
"Despite the necessity of capital expenditure for its yard expansion endeavours, we remain confident in the sustainability of dividends, underpinned by Dyna-Mac’s resilient balance sheet and the ongoing advancements within the oil and gas sector," says Yon.
As at 10.39am, Dyna-Mac changed hands at 36 cents, up 1.41%.
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