OCBC Investment Research analyst Ada Lim has kept her “buy” call on Dyna-Mac as she sees further upside for the company given a stronger-than-expected upcycle and potential catalysts ahead.
Meanwhile, Lim has lowered her fair value estimate – or target price – on the company to 36 cents from 50.5 cents to account for the issuance of the bonus warrants and assuming that 100% of the warrants will be converted.
Dyna-Mac proposed a bonus issue of up to 207.4 million warrants on the basis of one bonus warrant for every five existing ordinary shares in December 2023. The warrants were meant to reward the company’s shareholders for their loyalty and support, said Dyna-Mac in its Dec 18, 2023 statement.
The bonus warrants were approved on Jan 23. Each bonus warrant will entitle the holder to subscribe for one new ordinary share of the company at an exercise price of 15 cents, which Lim calls a “deep” discount of 46.4% to Dyna-Mac’s last-closed price of 28 cents per share as at Dec 15.
The gross proceeds from the exercise of the bonus warrants have been earmarked for capital expenditures (capex) as well as general corporate and working capital purposes. The proceeds are expected to amount to $31.1 million.
“In our view, existing investors can consider exercising their warrants to avoid dilution and to participate in the company’s future growth,” she writes in her Jan 24 report.
On Dyna-Mac’s acquisition of Exterran Offshore, Lim is positive on the move, as she sees that the additional fabrication capacity will help the company’s top and bottom line growth. The acquisition is also a sign of management’s bullishness for the company’s future outlook.
On the environmental, social and governance (ESG) front, Lim likes Dyna-Mac’s initiatives in reducing carbon emissions, building a diverse and inclusive work environment, as well as its commitment to being fully compliant with legal and industry requirements.
Dyna-Mac is set to announce its results for the FY2023 results ended Dec 31, 2023, after trading hours on Feb 20.
As at 12.01pm, shares in Dyna-Mac are trading 0.5 cents lower or 2.04% down at 24 cents.
