More Contracts Secured

Serba Dinamik (Serba) announced that it has secured a series of contracts which consists of operational & maintenance (O&M) and engineering, procurement, construction and commissioning (EPCC) in nature. All these contracts are Malaysian based and add up to RM206m. We continue to like Serba for its strong earnings-growth prospects. Maintain BUY with an unchanged 12-month TP of RM2.75.

Contract Details

Serba announced that it has been awarded 7 contracts (3 O&M and 4 EPCC jobs) which add up to RM206m. O&M work scope include (1) provision of transportation and installation services, (2) maintenance services, and (3) supply of manpower, equipment and tools. Meanwhile, EPCC works include erection, fitting, welding, testing, reinstatement of piping work, and general installation work. The duration for O&M contracts range from 6 months to 3 years, while EPCC range from 1-10 years. Please refer to Figure 1 for more details.

Ytd Contract Wins Add Up to RM2.2bn

We feel positive on these contract wins as Serba continues to showcase its ability and competitiveness to secure more contracts to boast its earnings growth. YTD, contract wins adds up to RM2.2bn (include only RM511m Northshore Residence portion in Pengerang Integrated Development Complex annoucement). O&M and EPCC order book is estimated to be at RM4bn and RM700m, respectively.

Updates on Construction Work

Seperately, Serba also announced that it will be commencing construction work for Pengerang eco-industrial park (PeIP) which is expected to cost RM400m over 2 years. Also, construction work to build a new maintenance, repair and overhaul (MRO) and inspection, repair and maintenance (IRM) centre in Tanjung Kidurong is expected to take place over a 2 year period and costing RM200m. All of these are not expected to have any P&L impact as highlighted in our previous note (Setting footprint Dated 21 August 2017).

Reiterate BUY; TP: RM2.75

We make no changes to our earnings forecast this contract is within our order book replenishment assumption. Maintain BUY with unchanged TP of RM2.75 based on 11x FY18E EPS. Key risk: unforeseen maintenance delays.

Source: Affin Hwang Research - 2 Oct 2017