Highlights

Serba Dinamik Holdings Berhad - Exceeding expectations

Date: 07/08/2020

Source  :  MalaccaSecurities
Stock  :  SERBADK       Price Target  :  2.27      |      Price Call  :  BUY
        Last Price  :  1.63      |      Upside/Downside  :  +0.64 (39.26%)
 


Summary

  • Serba Dinamik Holdings Bhd has received and accepted a letter of award from Future Digital Data Systems L.L.C (FDDS) to undertake the engineering, procurement, construction and completion of a data centre and its related facilities, infrastructure, and landscaping. The project shall be built at Mussaffah, Abu Dhabi and will be a master plan for total information technology (IT) with capacity of 20MW that can host mission critical systems and provide co-location services, business continuity and managed services facilities.
  • The contract price including taxes is a fixed lump sum price of approximately US$350.0m (approximately RM1.47bn) will be built by several phases – Phase 1A valued at U$$155.0m, Phase 1B valued at US$45.0m, Phase 2A valued at US$105.0m and Phase 2B valued at US$45.0m. The total duration of the contract is for 4 years. We reckon that the abovementioned project will yield gross margins around 15%, translating to a potential gross profit of >RM200.0m.
  • We are upbeat on the abovementioned contract secured and will strengthen the group’s outstanding orderbook to approximately RM18.50bn, providing earnings visibility till 2026. Breakdown of the existing orderbook; 50.0% from EPCC, 40% from O&M and 10% from ICT.  
  • The latest win deciphers Serba Dinamik efforts on diversification into other income stream apart from their bread and butter business. Assuming a burn rate of approximately RM2.30bn for the remainder of the year, the group outstanding orderbook by end-2020 will come at approximately RM16.20bn which exceeded our expectations of RM15.00bn. Moving forward, we reckon that the oil & gas business segment will still anchor the topline, contributing >70.0% of total revenue in both FY20 and FY21 respectively.

Valuation & Recommendation

  • We raised earnings forecast by 1.0% and 8.8% to RM532.6m and RM591.4m for FY20f and FY21f respectively to account for the stronger-than-expected orderbook replenishment. Consequently we maintain our BUY recommendation on Serba Dinamik with a higher target price RM2.27 (from RM2.09). Our target price is derived by ascribing an unchanged target PER of 13.0x to its revised FY21 EPS of 17.5 sen.
  • We continue to like Serba Dinamik as one of the key players in the oil & gas industry, backed by its sturdy orderbook comprising of dozens of jobs from local and overseas that will provide long-term earnings visibility, coupled with the group’s ongoing effort diversification into businesses that generates recurring income.
  • Risks to our recommendation include failure to hit the targeted outstanding orderbook of RM16.20bn by end-FY20. A firmer ringgit against the USD could affect the group’s bottom line as it will have a negative impact on the group’s earnings and vice versa with majority of existing orderbook derived from overseas.

 

Source: Mplus Research - 7 Aug 2020

Share this
Labels: SERBADK

Related Stocks

Chart Stock Name Last Change Volume 
SERBADK 1.63 -0.02 (1.21%) 6,164,800 

  Patrick13 likes this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
Perform Technical & Fundamental Analysis on Stocks
MQ Affiliate
Earn rewards by referring your friends
 
 

349  532  599  1023 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 LAMBO 0.030.00 
 PRG 0.2850.00 
 PHB 0.03+0.005 
 KGROUP 0.050.00 
 PNEPCB 0.39-0.03 
 XOX 0.095-0.01 
 KANGER 0.150.00 
 ASIAPLY 0.325+0.025 
 AT 0.18-0.005 
 KSTAR 0.275+0.005 

FEATURED POSTS

1. The Equity Market Index Benchmark in Malaysia CMS
2. Trading Scenarios of Derivatives Bursa Derivatives Education Series
3. Derivatives 101 Bursa Derivatives Education Series
4. Why Trade FKLI? Bursa Derivatives Education Series
5. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!
PARTNERS & BROKERS