KUALA LUMPUR (May 26): Serba Dinamik Holdings Bhd does not see the current low oil price environment having much of an impact on the group, noting there is still demand for oil and gas (O&G) services, despite the industry's slowdown.
The core business and main revenue generator of the energy services group which was listed on Bursa Malaysia in Feb 8, is the operations and maintenance sector (OMS), which involves the maintenance, repair and overhaul of rotating equipment and the inspection, repair and maintenance (IRM) of static machinery.
"The weak oil prices do not have any major impact on our performance moving forward, as our core business is in equipment maintenance. There will still be demand for jobs in the OMS area," said group chief executive officer Datuk Dr Mohd Abdul Karim Abdullah.
Speaking to reporters after Serba Dinamik’s annual general meeting, Abdul Karim said irrespective of whether oil prices rise or fall, oil production activities still require good and regular maintenance of equipment.
"No doubt the asset owners have tightened their budgets for maintenance works due to the tough economy, but we are a domestic and international player. When revenue from one market [is not satisfying], we will then strengthen our foothold in other countries and diversify our earnings sources," he said.
Serba Dinamik is currently servicing about 125 OMS contracts, valued at an estimated RM4 billion, which will last the group till 2021.
At the moment, the group derives a majority of 65% of its revenue from the overseas markets, whereas the remaining 35% is contributed by Malaysia.
For the year ended Dec 31, 2016 (FY16), the group posted a net profit of RM156.15 million and revenue of RM1.4 billion.
Serba Dinamik expects the 65:35 ratio for international and domestic markets to sustain, moving forward, said its group chief financial officer Syed Nazim Alsagoff, further noting there are “more orders coming from the Middle East”.
“In the first quarter of FY17, our performance from the Middle East in terms of revenue contribution improved to 65% from 50% in 4QFY16, and we see this improvement continuing in the next few quarters,” Syed Nazim said.
This, he said, was due to the size of the O&G industry there, as well as further business opportunities that will arise from the recovery of the sector, making the Middle East a strong market, on forward outlook.
When asked on the group’s merger and acquisition plans, Abdul Karim said the group has been undergoing “intense” discussions and negotiations with several parties — local and foreign — and expects to make an announcement in about a month’s time.
“Several of the discussions that we’ve had are at their tail end. Do give us another month, there will be major announcements. We are looking at strategic acquisitions, whereby the other party has the necessary technology and capabilities that can position us more strongly as an industry player,” he said.
“We are looking at entities in Europe, USA and the Middle East,” he added.
On a separate note, Abdul Karim opined the O&G industry, despite the downcycle, will be bullish in days to come, on the basis “there is no other alternative option that is more credible than this sector”.
“There are challenges in terms of getting the oil prices higher, which is now in the region of US$50 per barrel, but this kind of price is not necessarily unfavourable,” he said.
“If you look at the Middle East, most of the exploration, extraction and production activities are done onshore, and you are looking at production cost of between US$8 and US$15 per barrel. If you are selling at US$50 to US$55 per barrel, there is still profit.”