Dyna-Mac

Dyna-Mac: CLSA issues an unrated report on the counter. The house sees potential upside for Dyna-Mac.The company, a niche producer of floating platform storage and offloading (FPSO)units and floating storage and offloading unit (FSO) units, is experiencing positive orderbook momentum in 2014. Net orderbook as of May 2014 has already exceeded FY 13 revenue and pipeline is strong, but investors should be mindful of potential supply chain bottlenecks. Track record for the company is strong, and its strong relationships with leading FPSO operators are an added advantage. Profit has been driven down by stagnant price, increase in sub-contracting costs and new location start-up costs but management expects margins to recover after three years of tightness as prices rise by about 5% and the Dynamac takes a break from expansion plans. The company now has ample yard capacity in Guangzhou, Johor and Subic (Philippines) that it can tap on. Dynamac has underperformed the STI index this year. At current price of S$0.38, the company is trading at 9.7x FY15 PER and 1.8x PB, a significant discount to large cap peers in the same sector in Korea and Singapore.