RHB Research maintains ‘buy’ call on Serba Dinamik

KUALA LUMPUR: RHB Research Institute Sdn Bhd has maintained its ‘buy’ rating on Serba Dinamik Holdings Bhd following its above expectation performance result for the first-half year with earnings of RM161 million despite the forecast that second quarter will be a slower period.

Serba Dinamik’s pre-tax profit for second quarter ended June 30, 2017 (2Q17) rose to RM88.31 million while revenue for the quarter increased to RM649.70 million year-on-year.

The company’s main contributors are the operations and maintenance (O&M) division, which contributed 82.8 per cent to the total revenue, followed by the engineering, procurement, construction and commissioning (EPCC) division (16.97 per cent).

The research house said Serba Dinamik’s current orderbook across the two segments stood at RM4.7 billion with O&M estimated at RM4 billion and the balance from EPCC.

It was estimated that 90 per cent of its O&M orderbook was made up of maintenance, repair and overhaul (MRO) of rotating equipment while the remainder comprised inspection, repair and maintenance works, it said.

RHB Research said even with the current controversy surrounding Qatar and its neighbouring countries, Serba Dinamik’s maintenance operations were still ongoing with the Middle East still makes up the majority of its revenue.

“We believe the strong showing in 2Q17 would quell some fears over Serba Dinamik’s Middle East exposure. However, we do expect revenue from the Middle East to soften in 3Q17 as it coincides with the summer months before picking in 4Q17 again.

“We continue to be positive on the company as we believe its O&M business would continue to provide support to earnings while its EPCC segment is likely to provide the alpha,” it said.

RHB Research maintained ‘buy’ recommendation with a higher target price RM3 supported by the company’s good orderbook.

As at 10.45 am, Serba Dinamik’s shares added five sen to RM1.96 with 8.37 million shares being traded. — Bernama