• Net loss in 2Q
• Has to secure new orders
• S$312m net order book

Net loss of S$5.3m in 2Q15

Dyna-Mac Holdings reported a 62.5% YoY fall in revenue to S$36.5m and a gross loss of S$3.1m in 2Q15, leading to a net loss of S$5.3m in the quarter. Lower revenue was recognized as progress in construction was slow, due to delays in receiving engineering drawings and freeissued materials from current customers. Coupled with fixed direct overheads carried by idle facilities in its yards, the group saw its first loss-making and worst set of results since its IPO in 2011.

Waiting for new orders

Dyna-Mac has secured new orders worth S$149m YTD, comprising S$89m for 10 FPSO topside modules for the Catcher oil fields in the UK and $60m for six units of modules for offshore Angola. Looking ahead, the group has a net order book of S$312.5m with completion and deliveries till 2016, in which we estimate that most of the work should be completed by the end of 1Q16. Should market sentiment remain weak and new orders remain unforthcoming, there could be a gap in activity levels that the group may find hard to fill. Also, with the oil price rout, there could be margin pressure for new orders as oil and gas companies seek to negotiate for lower-priced contracts.

3Q15 may be sequentially better

Recall that we had earlier mentioned that 1Q15 also saw relatively low revenue due to the timing in revenue recognition of projects in the DynaMac’s yards in Singapore as well as the lower activity levels in the group’s overseas yards with most projects still in the initial stage of production. We were expecting some recovery in 3Q, and keep to this expectation. Still, given the dim earnings visibility, we switch our valuation to 1.0x P/B, and lower our fair value estimate to S$0.18 (prev. S$0.27). Maintain HOLD.

Source: OCBC Research - 17 Aug 2015