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Philip ( buy what you understand)
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Posted by Philip ( buy what you understand) > 2020-05-15 16:30 | Report Abuse
My reasoning for holding serbadk Warrants versus just buying the stock is as below:
Listing Date: 13 Dec 2019
Maturity Date: 05 Dec 2024
Number of warrants: 881,099,921
Exercise Price: MYR 2.6200
As I believe that at my current per warrant prices now of 0.237 per share, with 21 million warrants in my hand, I would be able to convert it all at the latest date of 5 dec 2024, which is within my expectations of conversion. As paying a cost of RM2.86 to buy a share of serbadk 4 years from today is a cheap investment in my opinion for a company that is guiding towards growing 15% in 2020 and onwards.
https://e-serbadk.com/serba-dinamik-lowers-target-growth-to-15serba-dinamik-agih-pek-makanan-rm500000-kepada-petugas-barisan-hadapan/
If they can keep the growth up, at a 4.5b revenue and 500m earnings guidance,
for FY2020, they are targeting 5.1b in revenue, 575m earnings
for FY2021, they are targeting 5.9b in revenue, 661m earnings
for fy2022, they are targeting 6.8b in revenue, 760m earnings
if we assume 5 billion shares dilution by 2024, and consistent growth trajectory with a PE20, an estimate share price of RM3.2 by 2025, paying 5 million is a reasonable cost for holding 21 million shares of something that I would have bought in the first place, with the added possibility of a upward swing on market rerating should the business perform better than expected.
In my opinion, Serba the company is running on the same legs as baker hughes and haliburton in its growth stage, by building up competency in its offices around the world, producing and training its own team of servicemen and software application in O&M services to increase efficiency. If they keep on the same track record and increasing its competency and footprint around the world in the same way, I don't see why the overall addressable market for serba cannot reach the same level.
I think Serba can definitely be a USD 4 billion company in the long run, if it is run as efficiently as haliburton (previously USD20b company) and baker hughes (USD30b company), but it depends on how serba comes out of this oil and covid crisis.