This article first appeared in The Edge Financial Daily on October 3, 2017

Serba Dinamik Holdings Bhd
(Oct 2, RM2.29)
Retain outperform call with a target price (TP) of RM2.85: Serba Dinamik Holdings Bhd’s wholly-owned subsidiary Serba Dinamik Sdn Bhd (SDSB) has secured around RM206 million worth of new contracts, comprising three operations and maintenance (O&M) and four engineering, procurement, construction and commissioning (EPCC) contracts.

Separately, the group has clinched the construction job for the Pengerang eco-Industrial Park (PeIP) worth RM400 million. SDSB is also embarking on more construction work, for its new maintenance, repair and overhaul (MRO) and inspection, repair and maintenance (IRM) centre in Bintulu, Sarawak, to be used as a platform to expand Serba’s operations in Sabah, Sarawak and Labuan, valued at about RM200 million.

Top Luxury Sdn Bhd, a wholly-owned subsidiary of SDSB, has been awarded the construction work for the PeIP. This includes the establishment of Malaysia’s first MRO and IRM Global Centre of Excellence that will be operated by SDSB. The RM400 million contract is expected to complete in about two years.

The new MRO and IRM centre is part of the development of an integrated energy hub, located in the Kidurong Industrial Area Phase II, Tanjung Kidurong, Bintulu, Sarawak. The centre will comprise a MRO workshop, blasting, coating and galvanising plant, warehouse and storage facilities, office building, training centre and other facilities such as a car park, power substation and waste water treatment plant.

We continue to like Serba, supported by its core activities in O&M and EPCC, driven by its expansion into international markets which, by its track record, has historically seen about 80% of its contracts renewed. The group’s robust RM10 billion bid book for the next three years will comprise about 70% O&M contracts and around 30% EPCC.

The clinching of new contracts and securing of prospective award, continue to support our “outperform” call, reaffirmed with a TP of RM2.85 based on our 12 times price-earnings ratio (PER) to forecast earnings per share of 23.8 sen for the financial year ending Dec 31, 2018 (FY18). These new contracts and awards have been accounted for sufficiently as part of our replenishment assumptions and thus have no effect on our estimates. — PublicInvest Research, Oct 2