Maybank Securities analyst Jarick Seet is keeping his “buy” call on Dyna-Mac after the company announced, on Jan 3, that it agreed to acquire Exterran Offshore.
The cash consideration of the share purchase agreement (SPA) for the total shares in Exterran Offshore was US$8.25 million ($11.0 million). The consideration of the acquisition comes with US$2.51 million of cash and net book value of US$3.65 million. However, the latest valuation report by OrangeTee Advisory valued the land and building at $17 million.
The acquisition will grant Dyna-Mac access to an additional 4.5 hectares of yard facilities along Gul Road, next to its own facility. It will also extend its waterfront length by 680m, which allows it to improve its current method of construction via split modules and shorten time to deliver projects among other things.
As such, Seet expects this acquisition to expand Dyna-Mac’s capacity by 30%, which is a plus. He has also lifted his FY2024 and FY2025 earnings estimates by 10% following the acquisition.
“We believe that the further expansion of its capacity through this acquisition signals bullishness by management on its future potential order wins which will likely lead to higher revenue and profitability,” he writes.
Separately, Dyna-Mac issued a one-for-five share bonus warrant at an exercise price of 15 cents per share or a 53% discount to its current share price to reward its shareholders.
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“We expect the warrants to be fully converted if approved,” says Seet.
To account for the dilution from the bonus warrants, assuming a conversion rate of 100%, Seet’s target price is lowered to 38 cents from 51 cents. The target price is pegged to 16.5 times Dyna-Mac’s FY2024 P/E.
As at 11.39am, shares in Dyna-Mac are trading 0.5 cents higher or 1.56% up at 32.5 cents.
