Excitement over Serba Dinamik’s third Bintulu Service Centre
KUCHING: Serba Dinamik Holdings Bhd’s (Serba Dinamik) prospects are said to be stronger following the rental of its third Bintulu Service Centre for 1.5 years to cater to the firm’s higher job flow.
The new service centre will be mainly utilised to service the five-year onshore maintenance, construction and modification ( MCM) contract secured from Petronas Carigali Bhd in February this year as well as the Shell MGS contracts.
Affin Hwang Investment Bank Bhd (AffinHwang Capital) saw that Serba Dinamik has received approximately RM50 million of MCM work orders, expected to be completed by December this year.
The combined workforce in Bintulu currently stands at 849 staff – 43 per cent contracted, 41 daily remunerated staff, and 16 per cent permanent staff – servicing a total of 21 contracts.
“The additional floor space opens up new opportunities. The recent expansion into a third Bintulu Service Centre is a good sign, as the current capacity is insufficient to cater to the jobs secured,” AffinHwang Capital said in a note yesterday.
“We believe the reallocation to the Bintulu Integrated Energy Hub (BIEH) next year would be a strong re-rating catalyst as this would allow Serba to bid for more contracts, especially engineering, procurement, construction and commissioning (EPCC) jobs.”
Serba Dinamik’s current outstanding order book of RM8.3 billion comprises RM6 billion of operation and maintenance (O& M) jobs and RM2.3 billion of EPCC jobs.
AffinHwang Capital said Serba Dinamik’s long-term prospects looked even more promising with BIEH.
The BIEH targets to achieve physical completion by 10-Dec-19 with the MRO service centre to be completed earlier, by June 2019. BIEH will consist of an MRO facility, steel fabrication yards and warehouse and storage yards, as well as blasting workshops and 9 factories.
“The first two Bintulu Service Centres are currently on rental will be progressively moved to the new site. By our estimates, the massive 30-acre development will double Serba’s current maintenance floor space, and its fabrication capacity by slightly more than that.
“We are excited over Serba Dinamik’s next phase of growth on fronts: the consolidation would help improve group operating efficiency and lead to better margins; and the increase in capacity would enable Serba Dinamik to bid for more maintenance and construction jobs in East Malaysia, Brunei, Indonesia and Singapore.”
Meanwhile, Serba Dinamik is also eyeing for the nine Petronas’ liquefiednaturalgas(LNG)complex turbine maintenance work, which is currently still under its original equipment manufacturer.
“We raised our FY20- 21E earnings by seven to 10 per cent on the assumption that the operational consolidation would drive improvement in its O& M segment margin.
“We also revised higher our FY20 associate profit assumption to RM18.7 million and that for FY21 to RM22 million from our earlier forecasts.
“Serba Dinamik remains our sector top buy pick with a target price of RM4.50 per share. We believe that the share price in the near term should re-rate on good earnings execution and a robust contract flow.