S&P, Fitch assign ratings to Serba Dinamik's US dollar sukuk


KUALA LUMPUR: S&P Global Ratings and Fitch Ratings have assigned ratings to engineering solutions provider  Serba Dinamik Holdings Bhd's proposed US dollar sukuk.

S&P Global Ratings said on Tuesday it had assigned its preliminary 'BB-' long-term issuer credit rating to Serba Dinamik. 

It also assigned its preliminary 'BB-' issue rating to the proposed sukuk trust certificates that the company guarantees.

“The rating reflected the company's modest scale with commoditised service offerings, limited record of large-scale project execution outside of oil and gas, large investment needs for future business growth, and somewhat untested asset acquisition strategy,” it said. 

S&P said however, the company's record of timely project execution within budget, respectable client base, good cost control, short but prudent history of equity raising, and investments temper these constraints. 

Serba Dinamik's revenues were from the Middle East and Malaysia. Its main business segments are operations and maintenance (O&M), and engineering, procurement, construction, and commissioning (EPCC) targeted at the oil and gas and the power sectors.

“Serba Dinamik's order book of about RM8.3bil as of Dec 31, 2018, which typically lasts three years, provides good cash flow visibility,” it said. 

Over the past three years, Serba Dinamik had shown strong revenue and cash flow growth – indicating the company's capability to renew expiring contracts and win new ones at a healthy rate. 

“We expect Serba Dinamik to extend its record of project wins and renewals, supporting its top line and cash flow. The company's long-term association with and repeat business from some key clients in O&G segment, such as Petroliam Nasional Bhd. and Royal Dutch Shell Plc., provides it with good experience to expand its target client base.,” it said.

Meanwhile, Fitch Ratings accorded a long-term issuer default rating (IDR) of 'BB-' with a stable outlook to Serba Dinamik.

“Serba Dinamik's  rating reflects its strong market position in Malaysia, where it is the fourth-largest provider of operation and maintenance (O&M) services to the oil and gas industry by 2017 revenue. 

“The rating is also supported by Serba Dinamik's solid financial profile, short-to-medium term revenue visibility and relatively low earnings cyclicality. Nevertheless, we believe that the company's small operating scale constrains its rating,” it said.

Fitch said its rating was based on a bid book annual growth rate of 10% in 2019 and beyond; new order-book win rate of 30% across 2019-2021 and order-book renewal rate of 25% from 2019.

It also expected Serba Dinamik to deliver an earnings before interest, depreciation and amortisation (Ebitda) margin pf arpund 17% over 2019-2021.

   

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