Good earnings visibility for Serba Dinamik


Yesterday, Serba Dinamik told Bursa Malaysia that the group had secured six operation and maintenance (O&M) contracts, one engineering, procurement, construction and commissioning (EPCC) contract and two information, communication and technology (ICT) jobs from Malaysia, Indonesia, United Arab Emirates and Guinea.

PETALING JAYA: Serba Dinamik Holdings Bhd will be angling for fresh jobs in decommissioning, petrochemicals and renewable sectors following the recent conclusion of the purchase of the RM320mil Teluk Ramunia yard from Petroliam Nasional Bhd.

The international energy services group’s outstanding order book has exceeded its FY20 (financial year ending Dec 31,2020) year-end target of RM15bil (50% jump year-on-year) since the first quarter this year (Q1FY20), despite the overall slowdown in the sector’s order awards.

According to AmInvestment Research, given the group’s quarterly order book depletion of RM1.5bil, its outstanding order book at RM18.5bil as at Q32020 is expected to decline by 5% in Q42020 unless the group secures additional contracts by then.

Nevertheless, the research unit said it would not be surprised by additional contracts soon as Serba Dinamik aims to lease parts of the facilities to third parties.

Yesterday, Serba Dinamik told Bursa Malaysia that the group had secured six operation and maintenance (O&M) contracts, one engineering, procurement, construction and commissioning (EPCC) contract and two information, communication and technology (ICT) jobs from Malaysia, Indonesia, United Arab Emirates and Guinea.

The overseas jobs include building a 4.8MW biogas renewable energy power plant at Aceh Tamiang in Indonesia (September 2020 – August 2021), providing maintenance services for microturbine generators in Indonesia (Sept 21,2020 – Sept 20,2022), Indonesia-based virtual technology demo room rental services (Nov 9,2020 – Dec 8,2021) and plant maintenance services in the UAE (Nov 30,2020 – Nov 29,2023), and implementing telecommunications and ICT infrastructure in Guinea (January 2021 – December 2022).

The combined contracts’ value from the overseas jobs is RM466mil (US$114mil) while the O&M jobs in Malaysia are on a call-out basis which will be awarded at the clients’ discretion.

These domestic O&M jobs were awarded by PTTEP, Sarawak Shell, JX Nippon Oil & Gas Exploration and BASF Petronas Chemicals.

The group’s net gearing has risen from 76% in 2QFY20 to 89% in 3QFY20 from working capital needs, with management aiming to cap it at below 1.0 times.

AmInvestment Research said the group’s good earnings visibility together with its recurring income profile translate to an unjustified FY21F PE (forecast price-to-earnings ratio) of only eight times versus its closest peer Dialog Group Bhd (over 30 times).AmInvestment Research maintained its “buy” call on Serba Dinamik’s stock with unchanged forecasts and fair value of RM2.20 per share, based on a 30% discount to a diluted sum-of-parts (SOP) valuation of RM3.15 per share.

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