KUCHING: Serba Dinamik Holdings Bhd’s (Serba Dinamik) latest contract wins garnered positive views from analysts as the wins further display Serba Dinamik continued competitiveness and competencies in job execution.
In a filing on Bursa Malaysia, Serba Dinamik said its wholly-owned subsidiaries Serba Dinamik International Ltd (SDIL) secured one operations and maintenance (O&M) contract while PT Serba Dinamik Indonesia (PT SDI) secured three O&M contracts, one engineering, procurement, construction and commissioning (EPCC) contract, and one other products and services contract.
Another wholly-owned subsidiary, Serba Dinamik Sdn Bhd (SDSB), secured five O&M contracts and one other products and services contract.
“Overall, we are positive on the contract wins, displaying Serba Dinamik’s continued competitiveness and competencies in job execution. We expect the jobs to fetch around midteens gross margins.
“The contract award represents Serba Dinamik’s first announced wins for this year, bringing its order-book to RM10.7 billion (40 per cent local and 60 per cent overseas),” the research team at Kenanga Investment Bank Bhd (Kenanga Research) opined.
Moving forward, it noted that the group targets an end-FY20 order book of RM15 billion, and maintain earnings target of high-teens percentage growth for FY20, thus providing possible upsides from its current estimations.
Meanwhile, the research team at Affin Hwang Investment Bank Bhd (AffinHwang Capital) said that these contract wins brings it closer to Serba Dinamik’s RM15 billion internal target by end 2020.
“Inclusive of these batches of contracts, Serba Dinamik’s current outstanding orderbook stands at RM10.7 billion. The O&M/EPCC breakdown at 66 per cent and 34 per cent (RM7.1 billion and RM3.6 billion) with 60 and 40 per cent overseas-domestic split.
“We remain positive on Serba Dinamik’s ability to secure more contract wins in the coming days with its tenderbook now at RM16 billion (O&M:EPCC ratio of 60: 40 per cent), with the Middle East its key market making up half of the tenderbook, 30 per cent from Malaysia and the remainder from Central Asia,” it added.
Aside from that, it estimated that the aggregate contract values secured from Malaysia are in the range of RM620 million.
“We believe the four plant turnaround packages for three years awarded by Petronas make up the bulk of the value at around RM500 million. Serba Dinamik also successfully secured two new clients: SapuraOMV and Samalaju Industrial Port Sdn Bhd. Gross profit margins are expect to be similar to the above Indonesia contracts at 12 to 15 per cent,” it said.
All in, AffinHwang Capital maintained its ‘buy’ call on the stock while Kenanga Research retained its ‘outperform’ call.
It said, “We continue to like Serba Dinamik for having one the best earnings delivery track records within the oil and gas space, coupled with outstanding management and best-in-class returns on equity (RoE) against sector peers. Further contract wins and continued earnings delivery would act as catalysts moving forward.”