Serba Dinamik: Phenomenal growth from recurring global maintenance Buy

We initiate our coverage on Serba Dinamik (Serba) with a BUY call with an upside of 62% to our fair value of RM6.50/share based on sum of parts, which implies an FY19F PE of 20x. We highlight that there is much room for Serba’s earnings multiple expansion given that these valuations are half of Dialog’s 36x, which is the company’s closest peer in Malaysia.

Serba’s business model offers recurring operation & maintenance (O&M) services together with engineering, procurement, construction and commissioning (EPCC) works while having strategic stakes in gas, water and hydropower assets as well as complementary foreign engineering partnerships. Serba is expected to deliver phenomenal earnings growth with a 5-year FY13-FY18F CAGR of 47% while that of its peers contract by 32% due to the lingering impact of the 2015-2016 crude oil price collapse which led to global project cutbacks.

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Source: AmInvest Research - 10 Oct 2018