KUALA LUMPUR (Dec 4): Kenanga Research has maintained its "outperform" call for Serba Dinamik Holdings Bhd, with a higher target price (TP) of RM2.75 from RM2.70, pegged at 15 times price-earnings ratio (PER) forecasted for the financial year ending Dec 31, 2021 (FY21).

The research house said it continues to like the group given its superb record earnings delivery, and with it having one of the best returns on equity (ROEs) within the sector.

To recap, Serba Dinamik announced yesterday it had secured a total of nine new contracts, consisting of five jobs from overseas and four others from locals, with a combined estimated contract value of RM465.9 million.

“Post the announcement, we raised our FY21E earnings (estimate) by 1% as we slightly bumped our order-book replenishment assumption to RM11 billion (from RM10 billion),” said Kenanga Research analyst Steven Chan.

Chan said the research house is positive on the contract wins — showing the group’s outstanding job delivery and contract winning capabilities, especially in the current challenging environment.

“We expect these contracts to fetch gross margins of about 15%, in line with the group’s historical average,” said Chan in a note.

More particularly, Chan said Kenanga is also positive on the two information and communications technology (ICT) contracts won in Indonesia and Guinea, seeing this as the continued fruition of Serba Dinamik’s efforts to expand into the sector.

“We guesstimate these two contract wins to be worth up to about US$45 million (about RM182.83 million). The segment is beginning to see meaningful contributions towards its bottom line for the past one to two quarters, and with continued initiatives of expanding into the sector, we are likely to see this trend continuing and further improve,” added Chan.

According to him, the group is expected to gradually reduce its reliance on oil and gas (O&G), improving its earnings resiliency.

At the time of writing today, shares in Serba Dinamik had risen eight sen or 4.82% to RM1.74, giving the stock a market value of RM5.9 billion.