SERBA DINAMIK HOLDINGS BHD (5279)
Sector: Oil & Gas

Company Background:
1) Providing engineering solutions to the Oil and Gas & power generation industries with operational facilities in Malaysia, Indonesia, UAE, Bahrain & UK
2) Engineering solutions – O&M (Operations and Maintenance), EPCC (Engineering, Procurement, Construction and Comissioning) & other product and services (compressed natural gas, CNG in Indonesia)
a) O&M – MRO services (Maintenance, Repair and Overhaul) for rotating equipment used in the energy industry. IRM services (Inspection, Repair and Maintenance) for steam boilers
3) Customer base – O&G operators, Gas processors and oil refineries, petrochemical manufacturers, engineering companies and contractors, independent power producers
4) Industries served – O&G Upstream (Production), O&G Downstream (Processing, refining and manufacturing) and Power Generation
5) listed in Bursa on 08 Feb 2017

Projects:
During FYE2017, Serbadk secured 34 additional contracts (non O&G) with an estimated value of approximately RM2.8 billion. Serbadk’s total order book value stands at approximately RM6.0 billion with an average contract duration of 3-5 years.
Contribution in Revenue:
1) O&M – 86%
2) EPCC – 13%
3) Others – 1%

Potential risks:
1) Fluctuation of Oil price - 79.55% of revenue is from O&G clients. Changes in oil price have minimal implication on the company, as long as the production platforms continue production and where maintenance contracts will be utilised
2) Forex risk - exposed to foreign currency risk on sales, purchases and borrowings. Serbadk maintained their cash inflow in a USD denominated bank account which provides natural foreign currency hedge
3) Oversea operational risk – Changes in political & economic factors. Serbadk has expanded their operations across 11 countries and 5 main regions to reduce their exposure to one individual country or region.

Other:
1) About 83.72% of the shares was hold by Top 30 shareholder. Board of director itself holds about 60% of the shares.
2) Acquired 24.8% stake in CSE Global which is listed in SGX. This acquisition will expand Serbadk’s geographical footprint given CSE’s global presence in more than 20 countries, including the USA, Mexico, Australia and New Zealand. 57% of its FY17 revenue was derived from the Americas region, followed by Asia Pacific (37%). Meanwhile, it may also strengthen Serbadk’s capability in IT-related services by potentially integrating CSE’s various IT solution platforms, which include systems automation, integration and packages.

Prospect:
Currently, Serbadk are targeting the Power Generation, Water Treatment and Utilities sectors. As of 31 December 2017, they secured over RM1.74 billion worth of non Oil & Gas related projects mainly focused on the hydro-power generation and water treatment sectors.

Notes:
1) Board of directors is very aggressive in expanding. They also have great vision in the growth of different industries in different countries that allows them to take advantage prior to other competitors. For example,
Malaysia – growing in renewable energy
Indonesia – growing in power generation
Middle East – shifting focus from upstream sector to downstream

DISCLAIMER: This is not a call buy or call sell recommendation, this post is intended for learning and educational purposes only, please trade at your own risk.

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