Serba Dinamik Holdings Bhd
(Oct 26, RM3.88)
Maintain buy with an unchanged target price of RM5.20: Serba Dinamik Holdings Bhd announced that it had secured four operation and maintenance (O&M) contracts worth RM512 million.
The contracts, which involve periods of one to two years, are from Qatar, Kuwait, Saudi Arabia and the United Arab Emirates. Moreover, Serba Dinamik also announced that it had won nine O&M contracts from Malaysia. These contracts do not have a specified value and will be on a call basis. The contracts encompass periods of between one and three years.
We do not foresee any delay in the Middle East maintenance contracts given the improving business conditions amid rising oil prices. We are positive on the new contracts. Its total contract wins announced year-to-date amount to RM2.1 billion. All in, we have made no changes to our estimates as these form part of our order book replenishment assumption of RM2.5 billion for financial year 2018.
Serba Dinamik’s order book is usually replenished on a quarterly basis with 80% of O&M jobs being renewed contracts. Year-to-date, O&M contracts of over RM1.6 billion have been renewed.
Its total outstanding order book is estimated at RM7.2 billion. This will provide good earnings visibility until 2021. The group’s tender book stands at RM12.5 billion, increasing from RM10 billion in August 2018. On tendering activities, we understand that the majority of contract bids are from Malaysia, Southeast Asia, Central Asia (Turkmenistan, Kazakhstan and Uzbekistan) and Africa (Senegal, Côte d’Ivoire and Guinea). — AllianceDBS Research, Oct 26