Investing theory 2 - IPO valuation

Why I invested in Serba Dinamik, Kpowers and SCIB


Good Morning everybody,

It has been a while. I am Philip, and so far I would like to introduce to you my long term growth story stock for the year that I have picked up. This was not an easy decision to make, as I have had many doubts about the accounts of these companies through the years, and going through company information I was very relunctant to buy the company despite the many good results, and even after buying, I have refrained from writing my investment analysis (although many analysts in my telegram group have asked me my reasons for buying), as I was still unsure of the viability of investing in Serba dinamik. However, the recent analyst presentation had a few analysts friends bringing up questions which cleared up my doubts.

First lets set the stage:

My buying costs for Kpower,SCIB and Serba.

I started my position in Serbadk during the March crisis, pulling the trigger on a 20th Feb at RM2.34, and averaging down to RM1.12 on 23rd March 2020, for an average cost of RM1.38. This was followed up by SCIB on 15th June 2020 at an average cost of RM2.07, and KPOWER on 17th June 2020 at an average cost of RM2.03.

Now, the question is why did I buy?

In quantitative terms, it seemed like a good risk to take, on a regular quarterly basis serba gives out dividends like clockwork. at 1.5 cent per quarter average, a 6 cents dividend at cost basis of 1.12 is a healthy 5.3% dividend yield. Very good numbers for a growth company. Even if oil and gas dropped to -37USD per barrel, and the world seemed like ending in March.

However, as many know, I am a qualitative investor. The main 3 questions to ask as a qualitative investor for oil and gas related companies is:




So, I went to thinking and came up with a few mental models.

1. Serba Dinamik will be in an industry where the numbers will be closely monitored due to Malaysia's connection to Middle east (jho low), figures and lending will be tight due to the massive losses in the industry. So any company trying to raise capital during this trying time is going to find it very very hard to do. right? WRONG.


So who is investing heavily in Serba Dinamik, and what did they see?

Local and Foreign Instituional Investors from Middle East?

Let's start here.

Note the Date. It will be useful later.

Who is this distinguished gentleman? It is non other than...

HE. Eng. Salah Salem Omair Al Shamsi, Abu Dhabi

a member of the royal family of Abu Dhabi. The owner of Liwa investment holdings, a former director of ADNOC, ( , and interestingly enough, also a very capable professional engineer with deep connections. One interesting thing to learn, both Karim and HE Salem, both are IR (Ingenieur), professionals and leading billion dollar technical companies which are very complex (and not sales, marketing and trading related). 

Very important point, especially to an engineer like myself. 

So, having taken notice of this visit, I asked myself a few questions, why would his excellency want to visit Malaysia and Karim? What is so special about Serba Dinamik? Taking the opportunity, I went to visit these 2 places:

BIEH in bintulu and PeiP in Pangerang. While in stages of construction, I received a lot of interesting information on what is going on and his overall picture of what Serba Dinamik is trying to do (successfully).

You see, how do you increase operations and management? Your bottleneck is the number of well trained staff who can handle jobs independently and reaching a satisfactory quality level in the shortest amount of time with acceptable skills. Usually for O&M jobs it is very expensive because of all the swiss and german technicians with high pay due to experience who charge 10-15K USD a day to visit and troubleshoot  and do maintenance. 

How do you solve that? Karim found an answer.

He bought tech companies to do AR (augment reality) training for maintenance, bought a school and training center, bought manufacturing and supply chain and fabrication facilities so he can provide a one stop, job winning center with new support team being trained on a daily basis to get all those skilled labour operations and mainteanance jobs that are sorely required around the world.

Sounds impressive? Not yet, because he went one step further.

Instead of building those fabrication yards and equipment repair facilities in China or USA or Germany etc where the skilled labour is, he decided to take the plunge and build those facilities right at the doorstep of the customers who need it, and train the labour locally. Inversion of a business model. If you think about it, the cost difference between sending out broken turbines and entire machinery out for parts back in USA, if you can repair the parts themselves and fabricate spare parts right next door, wouldn't it be cheaper? Definitely. This builds a roadmap of future monopoly where instead of sending things to the nearest service center which is Singpore fabricators, how about just a 20 minute drive away from pangerang?

And if you noticed Serbadk buying something worth 530 million from a client for 320 million and securing more long term projects from Petronas? Its just smart business.


Recently there was a corporate presentation to analysts. It can be found here. 

This webinar and soundbyte is a very interesting sharing, in which one line was very clear. The key to whether Serba Dinamik is going to float or drown is due to this years awarded EPCC project. Remember the chairman of Liwa Investment Holdings?


Make no mistake, both of these major projects are abu dhabi projects brainchild under HE Salem. All we are waiting now, is for the full plan and design to be submitted, and a to be released announcement by Abu Dhabi governemnt that it will take a share in this project, for it to become very "strategic" and major institutions in middle east will start taking a good long look. From the webinar corporate presentation, this announcement is coming up very soon and will clear my biggest worry, WHO IS PAYING FOR THESE EPCC PROJECT? I believe that with their track record of project completion and corporate relationship, they will do well.



Well, where are we currently right now is in a very interesting space. With 10+ quarters of revenue increases  growth, a new business unit which jump from 20 million to 120 million in revenue in a few quarters ( tech bought from india in AR and programming arm), one would expect things to move forward and a good return on investment right? (judging from the meteoric revenue and earnings rise of kpower and SCIB recently)

Sadly, a co founder and second largest shareholder no longer shares the same view, and is dumping his shares on a quick and deep basis as much as he can to achieve his other goals in life. I find no fault in that, as it allows me to buy shares at a cheap price, while waiting for the execution of the projects and collect dividends every quarter. He has decided to invest in istone, and multiple other companies in bursa, telling us that he is planning to forge his own path in company ownership rather than leaving the boat due to internal problems with serba dinamik. I wish Awang all the best, and hope he succeeds well.

In any case Serba Dinamik is a very unique company. It pays dividends every quarter, is growing revenue lights out, has a good debt to equity ratio, and is a malaysian company with exposure the world over (it even bought a  tiny profitable scottish company that deals in the north sea, while keeping the owner as CEO). It is making all the right moves, and has good reputation among its clients. Sadly, in a world of black lives matter, the "color" of the company matters just as much as how the company is performing. If Serba Dinamik was a chinese run company with international staff, the valuation would be sky high I'm sure. However, tainted with the malay bumiputera company mark, the bonds are selling at a record low, the bankers and analysts are saying books are cooked and investments are fake, and the low share price is used as a reason to prove that the company is a bad one.

Ask yourself one question, if someone gave you the financial report for the last 5 years since IPO without company details, what would you think of the company?

I won't be complaining as it allows me to buy at a cheap price over time, however, sometimes I feel companies that have performed for the last 25 years has earned a right to get a little more rope to hang themselves in, if it so. They should be compared, measured and judged for the actions they are doing and company performance, rather than the perceived reasonings behind it. I found myself also under the same bias for the longest while, thinking that just because the share price is low that the company must be bad. Luckily, even old dogs can learn new tricks (or hang themselves in it).

I will be updating this page as more questions come in. 

Hope you learned something new.

Happy Merdeka 2020 everyone.

PS. one last note: I called old friends at the major hardware stores teck guan, kozai, choobee in Sabah. For their Kota Marudu project, the construction materials? All in cash, lowest price possible delivery. A cooked book company? I think not.

P.P.S. As I am unable to share the analyst corporate presentation (only the webinar soundbyte), if you are interested for more information on the presentation I am more than happy to share it with you on my telegram group.

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3 people like this. Showing 13 of 13 comments

Choivo Capital


2020-09-02 17:41


The O&M is proven but EPC contract of RM7.71b and RM1.47b in Abu Dhabi??

2020-09-02 19:11

Philip ( buy what you understand)

Like I said, note the date and the the other IR engineer Saleh who is founder of liwa investments. Ask those big Abu Dhabi jobs come from him. This is what Karim said during analyst meeting:

The whole answer came like this:

It will be progress payment (never specify from who), which will be certified and accepted by the contract awarder. Who is the owner of Block 7 now? At the moment, the owner is one of the royal family in UAE. He is one of the mastermind behind the establishment of ADNOC and he is also a very active entrepreneur. We are also having a strong conversation with a few international financiers. HSBC has a very strong presence in UAE, Standard Chartered too and some local banks. Of course, the culture of UAE is in the sense that any project will be much stronger if the government of Abu Dhabi can come in and become a stakeholder in the project. Fortunately, we have got good news that the indication of such a situation to happen is highly possible. With that, we say it gives us a stronger assurance. To be honest, we feel the same as the analyst in the sense that the financing part stresses us a lot but this development gave us a more peaceful mind.

The next thing analysts always ask us is if Serbadk will share asset ownership in this project. The offer has been given to Serbadk to take up stake in the Abu Dhabi project. To the best of what we believe at the moment, there is a possibility but we want to emphasize that it falls under asset ownership model and it has never been the business intention of Serba to own a very high percentage of asset. We will just own a minimal percentage necessary to assist Serbadk in expanding its connection and relationship with prospects and future job that will come from that kind of arrangement. If the government of Abu Dhabi comes in, it will change the entire landscape of the project. This development is quite positive we received overnight based on documentary evidence we received yesterday.

Serba management is very confident that the government of Abu Dhabi will come in with a position in the project as it is very unique and adds long term value to the country itself which adds many previously had to be imported.

Take it as your will. Instead of investing based on past results, investing based on future returns will instead yield better results over time.

2020-09-02 23:20


Good morning Philip,
Mind to answer below questions?
July 22, 2020 14:00 pm +08

The project’s investor is Efire Capital Holdings Ltd, says Karim. A look at Efire’s website shows that the investment holding company in which Emiratis Salah Salem Omair Al Shamsi and Hadef Al Shamsi, and Karim himself are partners.
Question: Anyone know Karim ownership % in Efire Capital Holding Ltd.

“At the moment, we are finalising the pre-architecture with Gensler — one of top 10 architecture firms based in London. Soil investigation and traffic study are currently ongoing.
“Once the architectural design has been firmed up and accepted by Efire, we will start the ground work. We can put in the first invoice to Efire by end-August. Construction will start in the first quarter of 2021,” says Karim.
Question: So how to award the EPC contract when architecture design is not yet completed?

However, the group has a high net gearing ratio of 0.8 times as at March 31, 2020.
On its net gearing ratio, Karim says the group is monitoring the level every day. This is because it has sukuk and bank loans that require the ratio to not exceed the allowable threshold of one time.
“Sure, our borrowings have increased, but our earnings are increasing as well. So we are trying to [find a balance] between our debt and equity levels. One way to raise the equity portion is through private placement.
“Next year is a possibility (for private placement), but the shareholders should not be concerned because this is to fuel our business growth,” he adds
Question: So 2021 another round of cash call PP with 10% price discount. Is it better to sell the warrants and buy mother shares to at least get the dividend every quarter?

Besides the innovation hub, other non-O&G EPCC contracts that Serba Dinamik has won include those for a chlorine processing plant in Uzbekistan worth US$250 million, a chlor-alkali processing plant in Tanzania worth US$110 million and a hydropower plant in Laos valued at US$150 million.
Question: Do Serbadk own processing patent to offer processing plant?

2020-09-03 08:55


Nice to hear your thoughts Philips. High risk, high reward i guess. Hope this turns out well for you.

2020-09-03 12:26


This stock too boring just like many other good stocks... more like long term fixed deposit in the bank.

2020-09-03 12:56

Philip ( buy what you understand)

Hi sslee,

Let's try to answer your questions one by one.

1. Instead of asking karims share, instead we look to the purpose. In middle East just like in Malaysia, Indonesia and Brunei foreign companies cannot get jobs directly without a local partner share. As it is impossible to give 60% share of serbadk to a middle East partner to get the job, it is a necessary method to get projects going. Karims portion is just a necessary requirement to ensure that the project goes in and signed off by serbadk director. It would the exact same way if Facebook were to try to open business in Brunei.

2. The requirement is similar to design and build projects. In this case it is more similar to a development project. I put a budget out, pre-bid designs come out based on lump sum of what facilities I need, how many room etc, the costing is based on price per sqft and QS estimates. I must admit, this is very different to what I am used to, but I was told in middle East things are done differently. Execution risk abounds, but as the architecture design is also done by serbadk based on the price given, I think the reward is worth the risk.

3. It depends on your point of view. I have both. If you need cash, then dividends are important to you. For me, I care more about the structure of the business and it's prospects, because if it works I will benefit either way. If it doesn't, it doesn't really matter how much dividend you get if the share price goes to zero.

4. You can check serbadk on the products it now carries under its umbrella and distributor of. As for patent, I do not believe they have it, but it is not their core requirement, they just need to know how to operate and maintain. More importantly, as part of their exercise they also bought ownership a small part of the plant, making them owners of the earnings generated in the future. This is their asset sharing model, which is designed so they have a connection to the owners and allows them to get more o&m contract in the future.

2020-09-03 20:58

blood7 loves kavalan solist

hmm interesting.... btw, so is there gonna be a part 2 where you gonna write about Kpower & SCIB? i am waiting with bated breath...... u see, i read from somewhere you invested following tips from a disqualified accountant/retired fishing uncle (no offence to him, if any, i apologize in advance:p) and i hope that's not true.... is it? :)

2020-09-04 00:28

Philip ( buy what you understand)

You are welcome to join my telegram discussion group to meet said uncle and apologize to him in advance. And anyone who knows me knows it's silly to follow.. tips. I used to do that back in the 90s and lost my pants. These days I prefer to research and monitor a stock for 1-2 years before I make a decision.

The fishing uncle did propose, but he sold the stock at 2.5 - 3. While, I am still holding on. We just happened to buy the same stock, except I have far larger position.

You keep apologizing in advance. Stop doing that. If you know it's going to be a troll remark, then just don't do it.

2020-09-04 06:23


Good morning Blood7,
Should have listen to qqq3 and bought SCIB and Kpower?
This SCIB and need to read Balance Sheet, no need to do KC Chong kind of ROCE calculations. Just bet on Malaysia's Elon need accountants to advise you

2020-09-04 09:00

Wisdom for Freedom

Thanks for the good insight. I agree on the qualitative aspect which no doubt the leader of the company has vision and clearly knows what he is doing and where he is bringing the company to.

But I was looking for an answer on your #2 question on growing revenue along with increasing late receivables but to no avail. This is something i would worry about especially in this cloudy oil future due to the pandemic. There is a claim that the longer payment term is a trade-off of higher profit margin, but comparing with its closest peer Dialog, the margin doesn't look better. In addition, we all know obviously the debt is huge, which many may argue that this is necessary for future expansion and growth. The problem is, a closer look found the net operating cash is at the low side (18%-32%) of the net profit consistently for the past 4 years (with public disclosure), and operating cashflow is constantly lower than investing cashflow but still giving out dividend every year, i see the debt (inflow from Finance activity) will become more and more huge until a point it's not sustainable, if he failed to do anything to mitigate the risk, like improving receivables, or reducing dividend(no one likes).

Yes, low share price doesn't mean the company is bad, but there must be something the investors don't like about. In this case I'm one of the interested investors but concerned about the quantitative aspect. This perhaps justifies the low PE comparing to its peer. but i stand to be corrected.

2020-10-19 23:01


Philip, what is your thought on currrent Serbadk situation ?

2021-06-29 21:00


Gone with the wind

2022-01-31 13:32

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