Dyna-Mac (DMHL SP) has received a voluntary conditional cash offer from Hanwha Ocean SG Holdings for all its issued and paid-up ordinary shares at SGD0.60 per share. This offer is contingent upon Hanwha obtaining over 50% of Dyna-Mac’s total shareholding. While the offer is deemed fair, it is on the lower end of the fair value range. Investors are advised to wait for a potential revised offer that could be closer to or exceed the target price of SGD0.64, given the robust outlook for Floating Production Storage and Offloading (FPSO) units and Dyna-Mac’s strong financial position.
Positive Outlook on Dyna-Mac’s Performance
Dyna-Mac’s order book has seen substantial growth, doubling to SGD896 million over the past year. The company has also expanded its land holdings by 50%, which should accelerate order execution. Additionally, Dyna-Mac has reported a significant increase in gross margins, rising to 27.6% in 1H24 from 13.5% in 1H23. This impressive margin improvement, along with a strong net order book of SGD681.3 million, supports a positive outlook for FY24 and FY25.
Management’s Role and Company Strategy
Dyna-Mac’s management, led by AC Lim and his team, has been credited for its solid execution and record-breaking performance. The company’s consistent outperformance in this upcycle underscores the effectiveness of its leadership.
Implications of the Offer
The primary aim of Hanwha’s offer appears to be acquiring a controlling stake rather than delisting Dyna-Mac. The offer is structured to gain more than 50% of the shareholding, but a full delisting would require acquiring more than 90% of the shares. Consequently, Dyna-Mac may remain listed even if Hanwha succeeds in its current bid. Additionally, warrants are not included in the offer, requiring their conversion separately.
Investors should remain cautious but optimistic. The current offer is considered reasonable but not final, and with a robust outlook for Dyna-Mac’s industry and solid financial performance, a revised offer could potentially offer better value.