Serba Dinamik’s EPCC to be new source of growth
KUCHING: Serba Dinamik Holdings Bhd’s (Serba Dinamik) engineering, procurement, construction and commissioning (EPCC) segment is projected by analysts to be a new source of growth while decent revenue growth of 10 to eight per cent is expected from the group’s operations and maintenance (O&M) segment.
The research arm of Keannga Investment Bank Bhd (Kenanga Research) believed the EPCC segment will drive Serba Dinamik top-line growth in the next few years given the group’s aggressive bidding in local and overseas projects.
In the past four years, the EPCC segment has been growing at a compound annual growth rate (CAGR) of 30 per cent and Kenanga Research expected the segmental top-line to grow 85-47 per cent in financial year 2017-2018 estimate (FY17-18E) assuming EPCC orderbook win of RM500-500 million.
The research arm noted that year to date (YTD), Serba Dinamik has secured the RM289 million EPCC of the membrane water treatment plant awarded by Konsortium Armanie in which Serba Dinamik acquired a 40 per cent stake in February this year.
Other than the EPCC segment, Kenanga Research also expected Serba Dinamik to continue growing the group’s bread and butter business (O&M) through market share expansion across diversified industries and geographic markets and widening its range of services offerings.
“For instance, Serba Dinamik expanded its services offerings from maintenance, repair and overhaul ( MRO) of rotating equipment and inspection, repair and maintenance (IRM) of static equipment to total plant and facility maintenance, turnaround instrumentation, allowing them to bid for more jobs,” the research arm said.
Kenanga Research noted that apart from the servicing the oil and gas ( O& G) industry, Serba Dinamik also has a track record of diversifying into other industries such as manufacturing and petrochemicals.
It further noted that in the longer run, Serba Dinamik wishes to expand into marine engines and power generation facilities in large vessels, including bulk cargo and container ships.
All in, the research arm believed the growth trajectory for Serba Dinamik will continue.
However, in its view, the segmental top- line growth is likely to moderate to 10-8 per cent in FY17-18E from a CAGR of 67 per cent in the past four years due to high base effect.
Kenanga Research highlighted that in the past four years, Serba Dinamik’s gross margins ranged from 14.7-17.2 per cent.
“Bulk of the operations costs are parts, consumables and services, which comprise machine and equipment parts, tools and equipment, microturbines, compressors, piping and metal structures, oil, lubricants and fuel as well as fees paid to suppliers for their supply of parts and provision of services.
“This cost component is gaining weight relative to the total cost of operations as a result of new O&M jobs secured in the Middle East regions.
“Meanwhile, Serba Dinamik is in the midst of expanding its internal expertise to perform the jobs instead of paying professional fees to hire third-party technical consultants.
“Hence, we have seen the spike in personnel fees and reduction in professional fees in FY16,” the research arm said.