Investment Highlights

• Serba Dinamik Holdings Bhd started off as a provider of maintenance repair and overhaul (MRO) services in June 1993. Since then, the group has grown into a sizeble engineering solution service provider for the oil & gas industry. As of 2014, the group is ranked 11th among 2,687 Petronas-licensed oil & gas service and equipment companies in Malaysia for the provision of maintenance services to the oil & gas industry.

• The group is mainly involve in the operations and maintenance (O&M) which consists of maintenance, repair and overhaul (MRO) of rotating equipment and inspection, repair and maintenance (IRM) of static equipment and structures as well as engineering, procurement, construction and commissioning (EPCC) in the oil & gas industry. Todate, the group operates five service centers throughout Malaysia, housing approximately 838 employees.

• In order to expand its current operations, the bulk of its IPO proceeds (RM300.0 mln or 73.7%) will be spent on setting up additional facilities on a 30-ac. land. Additionally, the group targets to increase its clientele base (both local and international) to mitigate the slowdown in CAPEX spending from oil & gas companies that will reduce the value of its future contracts.

• Serba Dinamik has delivered a historical three-year (2013-2015) net profit CAGR of 63.4%, on the back of a historical three-year revenue CAGR of 61.8% totaling RM156.7 mln and RM1.40 bln respectively in 2015. At an indicative offer price of RM1.50 per share, Serba Dinamik trades at an estimated 2017 PER of 8.8x, a slight discount vs. small-medium oil & gas capitalised companies listed in Malaysia at 10.0x, thereby implying a slight share price upside potential

Group Background

Serba Dinamik’s history traces back to June 1993 with the incorporation of Serba Dinamik Sdn Bhd, a provider of MRO services for rotating equipment. The group purchased its first piece of land in 1994 in Kidurong Light Industrial Estate in Bintulu Sarawak, housing their first mechanical and fabrication centre.

In 1998, Serba Dinamik expanded into the IRM of static equipment. Subsequently in 2001, the group secured its first overseas contract with a global O&M service provider for upgrading of the turbine gas compressor and installation of a booster compressor for a LNG plant in Ras Laffan, Qatar. A year later, the group incorporated Serba Dinamik International in Labuan to focus on overseas business activities.

Serba Dinamik diversified into EPCC work in February 2007 by securing the lubrication oil varnish remover and filtering solution equipment for gas turbines contract from Malaysia LNG Sdn Bhd. Serba Dinamik IT Solutions Sdn Bhd was incorporated in 2010 to develop and provide ICT software and solutions for various industrial applications - mainly to support the O&M operations. The group received the MSC Malaysia status for research, development and commecialisation of in-house developed proprietary software, namely AlignSoft and myPLANT.

As part of the group’s asset owner business model strategy, the group’s 75.0% owned subsidiary, PT Serba Dinamik Indonesia has secured a 10-year leasing agreement for a 0.8 MW gas power plant and its auxiliary equipment. Todate, Serba Dinamik operates five service centers throughout Malaysia (one in Terengganu, and two each in Sarawak and Sabah), housing approximately 838 employees.

Based on Serba Dinamik’s total revenue of RM755.8 mln in 2014, the group was ranked 11th among the 2,687 Petronas-licensed oil & gas service and equipment companies in Malaysia in providing maintenance services to the oil & gas industry.

Business Model And Future Plans

Serba Dinamik is principally involved in: (i) O&M which consists of maintenance, repair and overhaul (MRO) of rotating equipment and IRM of static equipment and structures, (ii) EPCC, and (iii) other related business. A total of RM1.27 bln, or 90.9% of its revenue in 2015 was derived from the O&M segment, while the remainder came from EPCC (RM124.9 mln or 8.9%) and others related business (RM3.1 mln or 0.2%) such as trading of products and parts, logistics services, technical training and ICT solutions and services.

Operations and Maintenance (O&M)

The O&M segment, which is the core business of Serba Dinamik since its incorporation, accounts to RM1.27 bln, or 90.9% of the group’s total revenue in 2015. The aforementioned segment’s gross profit for 2015 stood at RM212.0 mln, translating to a gross profit margin of 16.6%. The segment’s gross margins have been flattish, ranging between 16.0% to 18.0% levels over the past three years. Serba Dinamik’s O&M services are supported by five service centres in Malaysia, one service centre in Bahrain and one in UAE. Maintenance, Repair & Overhaul (MRO) The contribution of MRO of rotating equipment constitutes between 69.0%-76.0% to the group’s total revenue over the past three years. Rotating equipment is use across various industries, including oil & gas (upstream and downstream), power generation, mining, agriculture, manufacturing, transportation and construction. Serba Dinamik’s MRO services are focused on rotating equipment in the energy industry which includes

Source: Mplus Research - 6 Feb 2017