KUALA LUMPUR (Feb 10): AmInvestment Bank Bhd said today it understands that Sarawak state-owned Brooke Dockyard and Engineering Works Corp is being offered to Serba Dinamik Holdings Bhd at a pricey RM150 million.
AmInvestment analyst Alex Goh, who did not specify the source of the information, wrote in a note today that Brooke Dockyard's debt has not been revealed at this stage.
"Brooke Dockyard, which has a major fabricator licence from Petronas with an annual capacity of 25,000 tonnes, is able to undertake heavy engineering works for oil & gas offshore modules, substructures and ship building.
"Measured against its yard size, the offer price translates to RM86 psf — this is 54% above Malaysia Marine and Heavy Engineering's RM56 psf currently based on its market capitalisation.
"At the current offer price, we would not be in favour of Serba Dinamik acquiring Brooke Dockyard unless the acquiree has managed to secure substantial contracts to support a value-accretive proposition. However, we are skeptical that Petronas would be willing to award huge contracts unless Brooke Dockyard had demonstrated good and timely execution on its projects," Goh said.
AmInvestment's note was in response to a report today by The Edge Financial Daily on talks between energy services group Serba Dinamik and the Sarawak state government on the planned Brooke Dockyard transaction.
The daily, quoting sources familiar with the matter, reported that Serba Dinamik is currently in the early stage of negotiations with the Sarawak state government on the acquisition of Brooke Dockyard.
"The value of the acquisition has yet to be determined, as both parties are exploring all possibilities," one of the sources said.
Another source was quoted as saying Brooke Dockyard had slipped into financial trouble after it incurred RM100 million of losses caused by a contract it has undertaken.
AmInvestment's Goh said that although Serba Dinamik has its RM259 million Bintulu Integrated Energy Hub in Tanjung Kidurong to service engineering, procurement, fabrication, operation and management projects in Sarawak, this facility does not have drydock capabilities to undertake vessels or large topside modules.
"Hence, Brooke Dockyard could strategically transform Serba Dinamik's offshore fabrication capability to a new level while complementing its operation and maintenance activities for Sarawak and the Middle East," he said.
He said AmInvestment maintained its buy call on Serba Dinamik shares with an unchanged fair value of RM3.
Meanwhile, Affin Hwang Investment Bank Bhd analyst Tan Jianyuan wrote in a note today that Serba Dinamik remains its high-conviction sector top pick because 2020 is set to be the most interesting year since its listing with aggressive order book growth targets set by management.
"We believe Malaysia will play a bigger role in its (Serba Dinamik) growth this year, particularly Sarawak (in tandem with upcoming state elections), and higher maintenance orders from Petronas' related plants. We raise our FY20-21E EPS (earnings per share) by 8-13% and our TP (target price) to RM2.80; reaffirm Buy rating," Tan said.
At Bursa Malaysia's 12:30pm afternoon break today, Serba Dinamik's share price settled down two sen or 0.86% at RM2.30 for a market capitalisation of RM7.09 billion. The stock saw 1.48 million shares traded.