Serba Dinamik’s stake acquisition in CSE garners positive reactions
KUCHING: Serba Dinamik Holdings Bhd’s ( Serba Dinamik) proposed stake acquisition in CSE Global Limited ( CSE) has garnered positive reactions from analysts.
In a filing on Bursa Malaysia, Serba Dinamik’s board of directors announced that wholly-owned subsidiary Serba Dinamik International Ltd had on April 13, 2018, entered into eight separate conditional share sale and purchase agreements in relation to the proposed acquisition with certain existing shareholders of CSE.
The proposed acquisition of 128,166,250 ordinary shares in CSE represented approximately 24.84 per cent of the total number of issued shares of CSE and was for a total cash consideration of approximately S$ 57.67 million.
“We are positive on the acquisition as it expands Serba Dinamik’s geographical footprint given that CSE has global presence in more than 20 countries, including the US, Mexico, Australia and New Zealand,” the research arm of Kenanga Investment Bank Bhd ( Kenanga Research) said.
According to Kenanga Research, 57 per cent of its FY17 revenue was derived from the Americas region, followed by Asia Pacific (37 per cent).
“Meanwhile, it may also strengthen Serba Dinamik’s capability in IT-related services by potentially integrating CSE’s various IT solution platforms, which include systems automation, integration and packages.
“Serba Dinamik could also tap its know-how on incinerator technology to enhance its capabilities in sewerage treatment projects.”
Kenanga Research recalled that CSE recorded core earnings of S$ 13.3 million ( equivalent to RM39.4 million) after stripping off several extraordinary items amounting to S$ 58.5 million in financial year 2017 ( FY17) while its net assets stood at S$174 million as of end-FY17.
The research arm noted that the acquisition implied trailing price earnings ratio ( PER) of 17.7-fold and price to book value ( PBV) of 1.3-fold.
“While the valuation may appear to be high, the management is confident that the outlook is improving with potential new orders from greenfield (comprises new installations) and brownfield (comprises maintenance, upgrade and enhancement of existing installations) projects,” it said.
“The acquisition will be fully funded via borrowings, which will lift FY18E net gearing to 0.23-fold from 0.15-fold.”