PublicInvest Research

Author: PublicInvest   |   Latest post: Mon, 25 Jan 2021, 10:42 AM


Serba Dinamik Holding Berhad - All-Time High Orderbook

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Serba Dinamik (Serba) announced a string of contracts and probably the final batch of 2020, comprising six in the O&M segment, one in the EPCC and two from ICT contracts in four countries – Malaysia, Indonesia, UAE and Republic of Guinea worth collectively RM561m (O&M: RM361m, EPCC: USD5.4m, ICT: USD43.8m). With this contract, Serba’s YTD win jumped to RM11.5bn, bringing it to historical high of RM18.7bn. We make no changes to our earnings forecasts. Therefore, our TP of RM2.45 based on PE multiple of 12.8x over FY21 EPS of 19.2sen remained unchanged. Our Outperform rating on Serba is affirmed given i) its defensive business nature even during the downturn, ii) delivery of 6-year earnings growth (FY14-FY20F) CAGR of c.50%, and iii) stability in its future earnings underpinned by its long-term recurring earnings.

  • The contracts. The five international-based contracts comprising of one EPCC, two Information, Communication & Technology (ICT) and two O&M in Indonesia, UAE and Republic of Guinea with firm value of c. RM465.9m. Meanwhile, the local projects comprising of four O&M are expected to be worth around RM95m and there could potentially be more as the work orders will be based on the call-out basis. The contacts lifespan is in between 1 – 3 years, with completion up to 2023. These projects are estimated to yield 17% profit margin at the gross level. Project Details in table 2.
  • All time high orderbook. This represents the fifth round of contracts award and could be the last one for this year with collectively 25 contracts worth RM11.5bn. With this new wins, Serba’s outstanding order book is at historical high of RM18.7bn, translating to 4.1x of revenue. Management’s target of an RM15bn balance orderbook at the end of 2020 appears to have been accomplished. We foresee the momentum to continue towards 2021 in line with progressive improvement in oil and gas industry. The needs to replenish orderbook is important for Serba in order to utilize the Teluk Ramunia yard though we believe that won’t be an issue given Serba’s strong presence and track record globally.


Source: PublicInvest Research - 4 Dec 2020

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