10 Questions for Dyna-Mac

1.    What is Dyna-Mac’s business about and what are some key business divisions?

• Dyna-Mac is a global multi-disciplinary contractor specialising in engineering, procurement, fabrication, construction, and onshore pre-commissioning and commissioning of offshore topside modules and facilities. Our expertise encompasses FPSOs, FSOs, FLNGs, and FSRUs. We excel in offshore topside module fabrication and construction, as well as onshore module fabrication for land-based plants in the hydrocarbons industry, with a focus on LNG, green and blue hydrogen, and ammonia. 
• Our piping solutions division fabricates exotic and non-exotic pipe spools for both onshore and offshore projects, including carbon capture and storage initiatives. Known for innovative and cost-effective solutions, we leverage advanced engineering tools and industry best practices to meet client needs across these diverse sectors.

2.    Could you share some of the key drivers behind Dyna-Mac’s 3.8x year-on-year jump in 1H2024 net profit?

• Dyna-Mac's 3.8x year-on-year increase in net profit for 1H2024 stems from several factors. We successfully completed major projects, boosting revenue by 42.5% to S$259.7 million. Our gross profit soared by 191.3% to S$71.7 million, thanks to improved project execution and cost management. 
• Other income rose 116.3% to S$7.6 million, driven by higher interest income, forex gains and increased scrap income. Net profit reached S$38.8 million, a 280.3% increase from 1H2023, due to project completions, enhanced productivity and increased project volume. Our strong order book of S$681.3 million as of June 2024 reflects sustained demand for our services, particularly FPSO topside modules.

3.    Dyna-Mac has traditionally been based in Singapore, but it seems there are plans for international expansion. Can you share more about this?

• Our expansion strategy is tailored to each region's strengths and opportunities. In Singapore, we have delivered 17 modules weighing 41,000 metric tonnes with zero lost-time incidents in 1H2024, underpinning our future-proofing strategy focused on sustainable growth through hydrogen and carbon capture projects. 
• In China, we are offering value-added services by leveraging our expertise and collaborating with local partners to build modules, optimising costs and timelines. 
• Our Middle East focus remains on oil and gas, utilising the region's excellent facilities and infrastructure for module fabrication, supported by skilled personnel from Singapore. This diversified approach positions us for sustainable growth and value creation across markets.

4.    What is the competitive advantage of being a pure-play versus an integrated player in your industry, and who are your main competitors?

• As a pure-play company, Dyna-Mac's competitive advantages include specialisation, agility, transparency and focused resource allocation. Our deep industry expertise allows us to deliver high-quality, innovative solutions. We can swiftly adapt to market changes and customer needs. Our focused approach offers clear performance visibility to stakeholders and enables efficient operations. 
• While we face competition from several Chinese firms in the offshore and marine engineering sector, our concentrated expertise in the hydrocarbons industry positions us uniquely. This specialisation, combined with our adaptability and efficiency, sets us apart in a competitive market.

5.    Could you give an overview of the current industry trends? How is Dyna-Mac well-positioned to capture these?

• Current industry trends include a focus on energy transition, digital transformation, sustainability and ESG considerations. Geopolitical factors and supply chain resilience are also key concerns, alongside innovations in materials and technologies. There is increased demand for natural gas as a transition fuel. Dyna-Mac is well-positioned to capture these trends through our expertise in low-carbon solutions, particularly in hydrogen and ammonia projects. 
• We leverage advanced engineering tools and digital technologies to enhance efficiency. Our strong order book and expanded fabrication capacity (up by 70%) enable us to meet increasing demand. Our commitment to high safety and environmental standards aligns with the industry's growing ESG focus, positioning us favourably in this evolving landscape.

6.    Could you elaborate on how Dyna-Mac’s ‘cost-plus’ pricing strategy guards against price volatility?

• Dyna-Mac adopts a cost-plus pricing strategy for certain projects. This method applies particularly to some of the materials and involves charging the costs incurred plus an agreed-upon profit margin. This strategy not only guards against price volatility but also ensures transparency for our clients, aligning with best practices in financial management and managing client relationships.

7.    Sustainability and ESG have increasingly been a key focus. How is your company committed to sustainability?

• Dyna-Mac is deeply committed to sustainability across environmental, social and governance (ESG) domains. Our environmental initiatives include decarbonisation efforts, energy and carbon footprint management, and robust waste and effluents management. We prioritise employee health and safety and promote fair employment practices. 
• Our strong corporate governance ensures transparency and ethical business practices, as recognised by our recent Most Transparent Company Award (Energy) in September 2024 from the Securities Investors Association of Singapore (SIAS). We actively engage stakeholders and innovate in clean energy, venturing into green hydrogen and ammonia projects. Through strategic partnerships, we continually enhance our sustainable capabilities, balancing growth with environmental stewardship and social responsibility. 

8.    What are Dyna-Mac’s plans for capital allocation?

• Dyna-Mac’s strategic capital allocation focuses on sustained growth and shareholder value. We're investing in yard development, expanding fabrication capacity by 70% to meet growing demand. We're enhancing productivity through advanced technologies and equipment upgrades. 
• We're exploring M&A opportunities, particularly targeting companies offering recurring income streams like plant maintenance services. We maintain a healthy working capital position to ensure smooth operations. Additionally, we're committed to rewarding shareholders through dividends. This balanced approach supports our growth objectives, enhances operational efficiency, and delivers value to shareholders.

9.    Why should investors take a closer look at Dyna-Mac?

• Dyna-Mac offers a compelling investment opportunity due to our solid financial performance in 1H2024. Our strong S$307.7 million net cash position as of 30 June 2024 enables us to seize opportunities. We operate in the thriving FPSO market, with a robust S$681.3 million order book extending through FY2026. 
• We're strategically diversifying into clean energy sectors like carbon capture and storage and hydrogen solutions. Our commitment to sustainability aligns with global trends towards cleaner energy. We leverage advanced technologies for enhanced project execution and efficiency, maintaining our competitive edge in the market.

10.    In September, Dyna-Mac received a voluntary conditional offer of S$0.60 per share from substantial shareholder Hanwha Group, which is seeking management control. What does this mean for investors?

• The company has appointed an independent financial adviser (IFA) to assess the offer, and we are awaiting their guidance. At this point, it's important to note that the company continues to operate as usual. We encourage investors to stay informed through the official SGX announcements, where any updates or developments will be communicated transparently.

10 in 10 – 10 Questions in 10 Minutes with SGX-listed companies

Designed to be a short read, 10 in 10 provides insights into SGX-listed companies through a series of 10 Q&As with management. Through these Q&As, management will discuss current business objectives, key revenue drivers as well as the industry landscape. Expect to find wide-ranging topics that go beyond usual company financials.

This report contains factual commentary from the company’s management and is based on publicly announced information from the company.

For more, visit sgx.com/research.

For more company information, visit www.dyna-mac.com

Click here for Dyna-Mac’s 1H24 results release.