KUALA LUMPUR (June 12): Serba Dinamik Holdings Bhd confirms it has acquired an 80% equity interest in Wellahead Engineering Ltd — an Aberdeen-based precision engineering service provider for the North Sea oil and gas industry — to further expand its geographical footprints.
The stake was bought for £1.5 million, which is equivalent to about RM8.09 million, it said in a stock exchange filing today.
"The acquisition is expected to further expand Serba Dinamik’s geographical footprints by venturing and penetrating into the North Sea market," it added.
The statement came after the UK's Daily business reported Serba Dinamik had acquired the stake in Wellahead, which leaves founder Mike Coutts, who will continue to manage Wellahead, the remaining 20%.
In a report on Thursday, AmInvestment Bank Research said Serba Dinamik plans to leverage on Wellahead as a cornerstone to build its operations and penetrate the North Sea market, which has yet to significantly contribute to the group's revenue.
"The deal will also provide Wellahead’s high quality capabilities with new opportunities for growth and access to Serba’s existing client base not just in Malaysia but also in the group's rapidly expanding operations in the Middle East, which has experienced an explosive FY14–FY19 compounded average growth rate of 63% over the past 5 years.
Wellahead, it went on to say, generated a revenue of £2.5 million in FY19, with an earnings before interest, taxation, depreciation and amortisation (EBITDA) margin of 16%, and a net profit margin of 12%.
"This translates to a value-enhancing acquisition PE (price-earnings) of 6x. As Wellahead's outstanding order book of £5–£6mil (2–2.4 times FY19 revenue) provides mid-range earnings visibility with no debt currently, we are positive on this development, even though earnings accretion will not be substantive due to the marginal scale of the transaction," the research house added.