IPO: Dyna-Mac

Dyna-Mac: IPO of 436.0m shares at $0.35, of which, 186.0m new shares and 250.0m vendor shares. 431.0m shares will be to institutions and priv investors, 5.0m shares will be offered to the public. Of note, Keppel Shipyard has on 17 Feb 2010, stated on a letter that it will or through a nominee subscribe for 250.0m shares…

The IPO opens today and closes on the 28 Feb 2010. The IPO comes with an over-allotment option of 30m shares. Total outstanding shares are 900.3m excluding the option, approx 315.1m in mkt cap…

After IPO, majority shareholders Lim Tze Jong will own 51.6% and KSL 27.8% of outstanding shares, a total of 543.8m. Net proceeds of $62.0m will be to used mainly for expansion of yard facilities, acquisition of additional equipment and expanding overseas…

Year-end of co is in May. 6M2011 results (HY2011) on 30 Nov 2010 posted a decline of 48.9%yoy with $83.7m rev and net profit of $10.1m -32.1%yoy. Total order book is at $138.0m, substantially lower compared to rev in FY2010. Post-IPO EPS of 1.12c, annualized translates to 15.6x P/E and on FY2010 earnings, EPS at approx 12.4x. Post-IPO NTA of 11.33c per share will result in a P/B of 3.09x…

Valuations are not particularly attractive. Furthermore, co has had net negative working capital in both HY2011 and FY2010 due to increased investments in expansion of yard facilities and capacities…

Co is mainly in the EPC business to the offshore oil and gas and marine sector. The business involves EPC of topside modules, detailed engineering and fabrication for semi-subs and sub-sea products such as buoys. Other fabrication parts include steel and mechanical structures, process piping and tanks...

Co’s module segment was approx 98.0% of rev in HY2011 but other ad hoc projects segment may boost rev which made up 48.8% of rev in 08. Grp has 2 major customers SBM and Modec which contributed 91.9% of rev in FY2010 and 86.7% (Modec 59.7% and SBM 27.0%) in HY2011. Both customers are big offshore names, Modec is the Japanese co Mitsui Ocean Dev & Engrg listed in Tokyo and SBM is a Dutch-based offshore co listed in Amsterdam…

Pros are mainly due to interest of cornerstone investor Keppel Shipyard, however valuations at 15.6x P/E amd 3.09x P/B appear to be higher than other EPC players and half yr results are relatively weak. Closest peer would be Technics O&G also in the module business at 8.06x P/E, other O&M support plays CH offshore at 7.61x P/E and MTQ at 7.57x.