Significant $115m order win for Dyna Mac

FAIR VALUE: S0.440

Dyna-Mac (DM) announced a $115m order win comprising 9 modules, 9 pipe racks, and a turret for FPSOs OGX-1, D-1, and Quad 204. We understand that the modules and pipe racks will be completed by FY12F, and the turret only in FY13F. The contract value is “provisional”, i.e., subject to revisions due to variation orders, but we understand this to be a “floor” figure.

But not yet time to pop the champagne: We estimate the turret to be worth about $60m-$70m, implying that the 9 modules and 9 pipe racks are worth a combined $50m— these are small modules where DM is concerned. Further, to meet our revenue and profit forecasts, DM needs to win a further $52m for FY12F and $86m for FY13F.

Change in financial year-end to Dec: In what came as a surprise, DM is hitting the reset button on its financial year, “*aligning+ with the reporting periods of most of its peers and business partners”. As such, we have revised all our forecasts, and we refer to the May-Dec 2011 period as FP2011* to distinguish it from the FY2011 ended May 2011.

$148m outstanding order book: DM quoted a $190m order book, of which we assume $42m to be recognized in the 4 months to Dec 2011. Outstanding order book is estimated around $148m, split approximately 60/40 between FY12F and FY13F. 

Expecting 1c dividend for FP 2011F*: Even though DM had a dismal 1Q ending Aug 2011, we expect the last four months to enjoy a boost from the variation orders not recognized in 1Q, adding to margins and profits. Since DM is still cash-rich, a 1-cent dividend to close the new financial year should not be difficult. Now fairly priced: Having fallen from its astronomical peaks post-IPO, DM is now trading in line with its peers at P/B and P/E of 3.0x and 14.5x against industry averages of 2.9x and 15.1x. We caution investors against over-exuberance like the last few times and getting swept up in a stock-price run unsupported by fundamentals.

Though DM now only holds about 62%/41% of FY12F/FY13F revenues in its order book, this is a much-improved position from last month when we held that order book concerns were the major share overhang. We have turned slightly more positive on DM’s prospects, given the sustained high oil price and record global spending on exploration and production. It is, however, not time to pop the champagne.

FV raised to $0.44, maintain HOLD: We continue to value DM at 15x forward P/E, for which we now use FY12F EPS, yielding a FV of $0.44. This is up from our previous $0.38 as we had previously incorporated the dismal 1Q which would have dragged down the full year figure. Maintain HOLD.