PublicInvest Research

Author: PublicInvest   |   Latest post: Wed, 11 Dec 2019, 9:46 AM


Serba Dinamik Holdings Berhad - Stronger Years Ahead

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Serba Dinamik (Serba) reported a healthy set of 4QFY18 numbers with both revenue and net profit surging by 21.2% and 39.1% YoY. This has resulted in the Group’s FY18 numbers remaining strong, with net earnings surging by 25.9% YoY to RM387.9m on the back of a higher RM3.3bn (+20.6% YoY) revenue. The numbers are in-line with our and consensus expectations, meeting 98% and 99% of full-year estimates respectively. The performance was mainly derived from the operations and maintenance (O&M) segment particularly from the Middle East and Central Asia regions, with the Group also maintaining its profit margins at 13% and 12% at pre-tax and net profit levels. We are leaving our FY19-20 forecast unchanged, backed by its solid orderbook c. RM8.3bn. We also introduce our FY21 earnings estimates. We reiterate our Outperform rating on Serba with an unchanged TP of RM4.69 based on 14x PER over EPS19 of 33.5sen. Serba is preferred amongst oil and gas players within our universe given its defensive business nature with stable earnings streams.

  • Strong 4Q earnings as activities pick up. As expected, revenue and net earnings in 4QFY18 improved by 27.0% and 31.3% QoQ respectively. These were mainly attributed to pick-up in oil and gas activities in 4Q, after the not-so-productive 3Q season. Notable pick-up was seen in maintenance, repair and overhaul (MRO) activities under the O&M segment particularly in the Middle East, Central Asia, and South East Asia regions due to higher call-outs.
  • Positive surprise from EPCC in 4Q. The Group’s engineering, procurement, construction and commissioning (EPCC) arm also showed better numbers in 4Q, with revenue and operating profit jumping by 50.0% and 50.7% QoQ. We understand that the contribution was derived from its contract with New Thunder Technical Services in UAE and Sufini Holdings Ltd in Tanzania. Nonetheless, this segment reported negative growth of 7.3% and 11.3% in the full-year FY18 revenue and operating profit. Profit margin at EBIT level maintained at above 16% however.
  • Even stronger earnings ahead. Earnings outlook for FY19 is expected to remain attractive backed by its strong outstanding order book in hand of RM8.3bn (O&M: RM6bn, EPCC: RM2.3bn) translating to c. 2.5x FY18 revenue. Meanwhile, we also understand that its tender book remains strong at RM16bn (approx. O&M: RM9.6bn, EPCC: RM6.4bn) with about 60% from international projects. We expect it will secure about RM2.5bn in FY19.
  • Dividend. Serba has declared a fourth interim single tier dividend of 2.3sen this quarter, bringing its total dividend for this year to 8sen translating to a payout of 30%.

Source: PublicInvest Research - 28 Feb 2019

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