Serba Dinamik’s strong earnings growth to continue
KUALA LUMPUR: With a strong orderbook at RM18.7 billion, Serba Dinamik Holdings Bhd (Serba Dinamik) will need to have successful job execution and delivery to continue its unblemished earnings delivery track record.
The group has also put in place ventures into fabrication for the oil and gas sector, as well as expansions of its information and communication technology (ICT) segment, to continue fuelling growth over the longer term.
This comes as Serba Dinamik’s net profit for its financial year 2020 (FY20) grew 27 per cent year on year (y-o-y) in tandem with a 33 per cent revenue increase to RM6 billion, partly offset by depreciation rising by 51 per cent to RM1.1 billion, net interest cost increase of five per cent, reversal of associate losses and a two percentage-point rise in effective tax rate.
“Amid the conditional movement control order (CMCO) caused by the Covid-19 pandemic, Serba’s fourth quarter (4Q) of FY20 net profit soared 37 per cent quarter on quarter (q-o-q) to RM202 million, driven by revenue increasing by 22.5 per cent.
“This was further supported by net finance cost dropping by 38 per cent from sukuk refinancing,” commented analysts with AmInvestment Bank Bhd (AmInvestment Bank).
Geographically, 80 per cent of Serba Dinamik’s 4QFY20 revenue increase came from Malaysia, of which operation and maintenance jobs accounted for 77 per cent. Hence, the proportion of Middle Eastern contribution to group revenue slid to 56 per cent from 64 seen in 3QFY20.
“Including the RM1 billion contracts secured over the past month, we believe Serba’s outstanding order book rose slightly by one per cent q-o-q at RM18.7 billion. However, as previously highlighted, this locked-in future revenue has exceeded the group’s FY20 target of RM15 billion which was set in early 2020.
“With management aiming for an FY21F order book growth of 15 per cent, we expect the group’s revenue growth prospects to be supported by plans to lease parts of the 170-acre Teluk Ramunia yard to third parties while angling for fresh jobs in decommissioning, petrochemicals and renewable sectors.”
Separately, Malacca Securities Sdn Bhd (Malacca Securities) said the latest bulk of contract wins in January 2021 reinforced its views on Serba Dinamik’s capabilities in securing recurring and new projects within the oil and gas industry.
“At the same time, the recent recovery in crude oil prices, coupled with the acceleration of Covid-19 vaccine rollout bodes well with major oil and gas players are potentially looking towards an upward revision in their capex plans for 2021,” it added.
“While the oil and gas business segment will continue to anchor the overall earnings growth, Serba Dinamik is gradually shi ing towards other business segments, particularly the ICT business segment.
“For the time being, the ICT segment orderbook of approximately RM2.2 billion – close to 12 per cent of total orderbook of RM18.7 billion – will sustain earnings visibility over the foreseeable future.
“We continue to like Serba Dinamik as one of the key players in the oil and gas industry, backed by its sturdy orderbook comprising of dozens of jobs from local and overseas that will provide long-term earnings visibility, coupled with the group’s on-going diversification effort into businesses that generates recurring income.”