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Serba Dinamik’s EPCC expansion target remains promising

KUALA LUMPUR: Serba Dinamik Holdings Bhd’s prospects to grow its engineering, procurement, construction and commissioning (EPCC) segment remain promising with ample hydropower and utilities projects up for grabs, a research house said.

The group targets to achieve an orderbook of RM10 billion by end-2019 by securing new EPCC contracts and investing in small stakes.

AffinHwang Capital said earnings growth from Serba Dinamik’s EPCC segment next year should mainly come from its Terengganu water treatment plant (RM235 million outstanding EPCC value), Tanzania chloro-alkali plant (RM315 million), Laos 30 megawatt (MW) power plant (RM275 million) projects and UAE’s New Thunder project (RM100 million).

“The construction of a 60MW hydropower project in Perak will likely see a slight delay, now targeted to start in early Q3 2019, while the recently-invested LNG (liquefied natural gas) project is on track to commence construction in Q4 2019,” it said.

AffinHwang said Serba Dinamik was also on track to achieve its 200MW target as it now has 120MW of assets in its portfolio, and was actively pursuing new projects in Indonesia, Laos and Vietnam.

Meanwhile, it said the Middle East (UAE, Saudi Arabia and Qatar) and Central Asia remain the few key regions with more available operations and maintenance (O&M) jobs in 2019.

AffinHwang said based on the latest Petronas 2019-21 Activity Outlook, the outlook for plant turnaround activities had turned bullish, revising from 3.5 million man hours to 8.1 million man hours.

“This translates to an incremental 4.6 million additional man hours which is positive as plant turnaround also yields higher margins compared to other O&M jobs.

“This could potentially boost contribution from Malaysia, leading to upside potential to our financial year 2019 estimated earnings,” it said.

AffinHwang has reaffirmed its “buy” call on Serba Dinamik with a target price of RM4.70.

“In our view, the recent drop in the share price provides a good opportunity to accumulate the stock, on the expectation of stronger growth prospects in terms of earnings delivery and order-book replenishment,” it said.