Kenanga raises earnings forecast on Serba Dinamik

KUALA LUMPUR: Kenanga Research raised its earnings assumptions on Serba Dinamik Holdings Bhd following its recent contract wins.

"Post-announcement, we raised our FY21E earnings by 1% as we slightly bumped our order-book replenishment assumption to RM11b (from RM10b).

"We continue to like SERBADK given its superb record of earnings growth delivery, and for also having one of the best ROEs within the sector," it said in a note.

The research house maintained its "outperform" recommendation on the stock with a higher target price of RM2.75 from RM2.70 previously.

According to Kenanga, the contracts wins display Serba Dinamik's outstanding job delivery and contract-winning capabilities during the current challenging environment.

It expects the contracts to fetch gross margins of about 15%, in line with the group's historical average.

"More particularly, we are also further positive on the two ICT contracts won in Indonesia and Guinea, seeing this as the continued fruition of the group’s efforts of expanding into the sector.

"We guesstimate these two contracts wins to be worth up to ~USD45m," it said.

Kenanga said the segment has made meaningful contributions towards the bottom-line over the past one to two quarters while continued expansion into the sector would likely see this trend continuing and improving.

The contract win announcement was Serba Dinamik's fifth this year, which brings wins to about RM11.4bil.

Its order book stands at a high of RM18.7bil of which about 40% is derived from oil and gas.

Kenanga expects the continued wins to reduce the group's reliance on oil and gas, and improve resiliency in earnings.
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Kenanga Research , Serba Dinamik


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