SERBADK secured a total of 13 new O&M contract - 4 in the Middle-east (RM512.17m in value), and 9 local (undisclosed value). We are positive on this, bringing YTD new wins to RM2.2b and orderbook to RM7.2b. No change to earnings as it is still within our replenishment of RM3.0b. BUY with TP at RM4.45 pegged to 15x PER on FY19E or approximately 20% discount to our oil and gas sector's average. We continue to like SERBADK, with it being our TOP PICK within the oil and gas sector, given its; (i) consistent and commendable track record of earnings growth delivery, (ii) dynamic expansions into new markets through inorganic growth, and (iii) superior ROE among its peers - 22% versus sector average of 8%. 

SERBADK announced a total of 13 new operations and maintenance (O&M) contracts awarded: (i) 4 in the Middle-east with combined value of approximately RM512.17m (ii) 9 local contracts with undisclosed value as they are on call-out basis, but our guesstimate is around RM100m in value. 

We are positive on the contract wins as it not only signifies SERBADK's strong footing in the Middle-east, but also demonstrates its competitiveness within the local scene - both of which are their core geographical markets (revenue contribution for 1H18 - Middle-East 70%, Malaysia 28%). 

This brings YTD new contract wins to around RM2.2b, still within our orderbook replenishment assumption of RM3.0b for FY18 and bumping up the group's orderbook to around RM7.2b. We expect gross margins for the slew of new contracts to be around 17%, in-line with SERBADK's historical average. Notwithstanding this recent win, we are still expecting more contract wins from SERBADK before the close of the year, driven by current tenderbook of roughly RM11b. 

Source: Rakuten Research - 26 Oct 2018