Serba Dinamik (Serba) announced that it has secured a few contracts, with a combined value of RM496m, that are operational & maintenance (O&M) and engineering, procurement, construction and commissioning (EPCC) in nature. We make no changes to our earnings forecasts. We maintain our BUY call and target price at RM3.60 based on 14x FY18E EPS.

Two Sewerage Treatment Plants and a Government Building

Serba announced that it has secured a total of RM496m in contract wins. The bulk of the contract value was secured with Greenearth Landmark Sdn Bhd at RM385m. Serba will be in charge of the planning, designing, constructing, landscaping, equipping, installing, testing and commissioning of the sewerage treatment plant (STP) and 12-floor government building at Hartamas, Kuala Lumpur (KL), as well as another STP at Kerayong at Pandan area (KL). Construction work is expected to begin by end 1QCY18. In addition, Serba has secured a 10-year maintenance contract to maintain the Hartamas STP once it is completed.

Icing on the Cake

Serba also announced that it has secured 4 contracts (1 EPCC and 3 O&M) which are related to: 1) fabricating and welding for the Petronas LNG complex which will span from Sept-17 until Sept-20, 2) provision of weather forecast services for the SK10 drilling campaign with JX Nippon from Nov-17 until Nov- 20, 3) maintenance of rotating equipment for the Petronas LNG complex from Nov-17 until Nov-20, and 4) terminal operation, maintenance and support services for Petronas Dagangan from Jan-18 until Dec-20.

Positive on Expanding Order Book

Inclusive of these contract wins, ytd contract wins total adds up to RM2.5bn bringing the current outstanding order book to RM5.3bn. O&M and EPCC contracts make up RM4bn and RM1.3bn, respectively.

Reaffirm Our BUY

We maintain our bullish stance on Serba as it continues to demonstrate a strong ability to secure contracts vis-a-vis other players in the industry. We reiterate our BUY call with an unchanged TP of RM3.60 based on 14x FY18E EPS. Key downside risks would arise from any unforeseen operational hiccup or client maintenance schedule delays.

Source: Affin Hwang Research - 30 Nov 2017