PETALING JAYA: Serba Dinamik Holdings Bhd’s operations and maintenance (O&M) business will remain strong in 2019, while its engineering, procurement, construction and commissioning (EPCC) division is set to chalk a stronger performance.
RHB Research said the group’s O&M business is expected to maintain its performance this year, with Middle East demand for its services remaining robust, even as it continues to penetrate into the Africa and Central Asia markets.
The EPCC division, on the other hand, is expected to record a stronger performance this year, with the construction of multiple projects set to be ramped up, totalling RM1bil.
The projects include the Kuala Terengganu water treatment plant, Tanzania chlor-alkali plant, Kota Marudu and Laos hydropower plants.
The research house, which reiterated its ‘buy’ call on the counter with a higher target price of RM4.72, said it continued to like the stock due to its sustained growth in O&M globally, with further legs of growth stemming from its upcoming asset ownership portfolio (mostly associate stake).
This, it said, was coupled with inroads into Pengerang, Johor through the Pengerang Integrated Development (PID) project.
“Downside risks to our call are cost overruns of EPCC projects and plant downtime on associate-owned plants,” it said.
RHB Research said Serba Dinamik’s full-year core profit had come in in line with its and Street estimates.
The group had also declared a fourth interim dividend per share of 2.3 sen.
Core profit for Q4’18 rose 36% year-on-year, driven by sustained growth in its O&M business, particularly in the Middle East.
This was despite the profit being partially offset by slower EPCC activities in Malaysia due to a lower call-out rate for New Thunder Services in its United Arab Emirates and Malaysia contracts.
“We maintain our earnings estimates for this stock as well,” it said.
On the Pengerang project, the research house noted that construction was still in progress – with mainly piling works currently – and completion expected in Q4’20.
The PID project is worth RM666mil and is mainly focused on maintenance and plant turnaround business functions excluding property).
The research house said it had noted factored in any earnings contribution from the project, pending finalisation of the ownership structure of the sub-projects within PID and higher visibility of O&M job wins from the Pengerang area.
In addition, it said, the group also has a mixed property development project in the same area, spanning 7.5 acres, expected to come up by Q4’21, which could further add to its sum of parts valuation upon announcement of further project details in the next two years.
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