Serba Dinamik’s latest wins a huge boost
KUCHING: Serba Dinamik Holdings Bhd’s (Serba Dinamik) latest string of new contracts has been viewed positively as a huge boost to its information, communication & technology (ICT) segment and a testament to its jobs winning capabilities.
On Wednesday, Serba Dinamik announced that through its 75 per cent-owned subsidiary PT Serba Dinamik Indonesia (PT SDI) as well as through its wholly-owned subsidiaries SDIT International Ltd (SDITIL) and Serba Dinamik Sdn Bhd (SDSB) secured one engineering, procurement, construction and commissioning (EPCC) contract, two ICT contract, and seven operations & maintenance (O&M) contracts respectively.
Kenanga Investment Bank Bhd’s research team commented: “We surmise that the bulk of the overseas contract sum stems from the ICT contracts in Zambia (more than US$100 million), thus these contracts are the largest ICT contracts in the company’s history.
“This is a huge boost to the group’s ambition of growing its ICT segment to be its third core business, complementing the two other core segments of O&M and EPCC, as well as broadening the company’s revenue base. Contribution from the segment is still relatively inconsequential at the moment, but the company is targeting the segment to grow to approximately RM300 million revenue contribution by yearend (circa five per cent of the financial year 2020 revenue).
“Additionally, this also marks the company’s first contract in Zambia, as well as its second in Africa (the group has existing contracts in Tanzania).”
As for the local contract wins, the research team pointed out that the contracts would further solidify Serba Dinamik’s market leading position within the domestic onshore maintenance space.
It noted that the contract wins represent the group’s third contract win year to date (YTD), bringing YTD wins to approximately RM9.4 billion.
Post-win, the research team highlighted that Serba Dinamik’s order-book currently stands at circa RM17.5 billion, providing circa three to four years of revenue visibility.
“We expect these contracts to fetch 15 to 20 per cent gross margins, in line with the company’s historical average,” it added.
In a separate report, the research team at AmInvestment Bank Bhd (AmInvestment) said these confirmed fresh contracts would enlarge Serba Dinamik’s already huge order book by three per cent to RM17.5 billion (3.4-folds FY20F revenue), of which 44 per cent stem from the massive US$1.8 billion ( RM7.7 billion) Innovation Hub property development project in Abu Dhabi.
“This already exceeds
We surmise that the bulk of the overseas contract sum stems from the ICT contracts in Zambia (more than US$100 million), thus these contracts are the largest ICT contracts in the company’s history. Kenanga Investment Bank Bhd
management’s FY20F year-end target of RM15 billion,” it pointed out.
All in, AmInvestment retained its ‘ buy’ rating on the stock. It said: “We are positive that Serba Dinamik will be able to secure fresh jobs during an oil & gas cyclical downturn.”
Kenanga Research retained its ‘outperform’ rating. It opined, “We continue to like Serba Dinamik given its superb record of earnings growth delivery, and also having one of the best return on equities within the sector.
“With only circa 40 per cent of its order-book exposed to oil and gas, we believe it to be one of the few resilient names among its peers to better navigate through the current oil down-cycle.”