• Serba announced that secured 6 O&M, 2 ICT and 1 EPCC contracts worth a combined value of RM466m. Among the O&M contracts, 4 are from Malaysia with the other two being from Indonesia and UAE
• Current outstanding order book has grown from RM10.7bn as at end 2019 to RM18.5bn currently, securing a total RM11.4bn of new contracts ytd
• Reiterate our BUY rating and with an unchanged target price of RM2.15

Secured 4 local O&M contracts

Serba Dinamik (Serba) secured 4 local O&M contracts comprising: 1) repair and maintenance of PTTEP rotating equipment (for 3+1 years), 2) supply of micro turbine generators for Sarawak Shell (1-year period), 3) weather forecast for JX Nippon (3-year contract), and 4) Petronas Chemical plant turnaround (to be completed by May 2021). No contract value was announced, but by our estimates, the combined value is likely slightly under RM100m.

Cumulative international wins amounted to RM466m

Serba secured 3 contracts from Indonesia: 1) construction of 4.8MW biogas renewable energy power plant (to be completed by Aug-21), 2) maintenance of PT Pertamina Capstone micro turbine generators (2-year contract) and virtual technology demo room rental for PT Pertamina (for 1 year). The bulk of the contract value is related to the plant maintenance contract in the UAE for Najmat Al Maisan Technical Services, and the ICT contract in the Republic of Guinea for Komconsult Sdn Bhd. Both of these are new clients secured, with work expected to be completed by Nov-23 and Dec-22 respectively.

Reiterate Buy rating

Inclusive of this, Serba has secured new contract wins amounting to RM11.2bn, higher than 2019 new wins of RM3.3bn. The order book has grown from RM10.7bn as of end19 to RM18.5bn currently, with the largest contract (Block 7 innovation hub in the UAE) making up close to 40% of the order book. The ICT business has grown to 11% of current order book size, solidifying management’s internal target to double its revenue. We maintain our target price of RM2.15, based on 12x FY21E EPS and reiterate our Buy call. Our 2021E earnings growth forecast is below consensus as we are cautious on potential delays in existing EPCC projects. Key risks include unforeseen delays in clients’ maintenance schedules and existing EPCC progress, and cost overruns.

Source: Affin Hwang Research - 4 Dec 2020