Sarawak to play bigger role in Serba Dinamik’s growth this year
KUCHING: Malaysia is expected to play a bigger role in Serba Dinamik Holdings Bhd’s (Serba Dinamik) growth this year, particularly Sarawak, in tandem with upcoming state elections, and higher maintenance orders from Petroliam Nasional Bhd’s (Petronas) related plants.
Affin Hwang Investment Bank Bhd (Affin Hwang Capital) believed Malaysia would play a bigger role in realising this year’s order book growth, particularly from the state of Sarawak.
It pointed out that Serba Dinamik’s group managing director and chief executive officer (CEO) Datuk Mohd Abdul Karim Abdullah has set his eyes on an orderbook target of RM15 billion, up 50 per cent growth, by end 2020.
“Serba Dinamik has invested RM250 million to develop the Bintulu Integrated Energy Service Hub which spans across a 30-acre piece of land, which it targets to be completed by the first quarter of 2020 (1Q20).
“From our site visit back in April 2019, we gather that this will help double Serba Dinamik’s current maintenance floor space and its fabrication capacity by slightly more than that.
“Sarawak being Serba Dinamik’s strong home-ground should favour contract flows from this region in the coming months, in our view.”
Based on prospective bids, the research firm gathered that Serba Dinamik is bidding for approximately RM4.8 billion worth of jobs in Sarawak, representing 30 per cent of the total tender book of RM16 billion.
In addition, Affin Hwang Capital believed operation and maintenance (O&M) activities could see a demand spike - from the Pengerang Refinery and Petrochemical Integrated Development (RAPID) plant and more work conversion from the Master Service Agreement awarded by Petronas in October 2019.
“Johor would be another key state to look out for, potentially benefiting from higher O&M jobs as the Pengerang RAPID plant gradually starts up.”
Meanwhile, AmInvestment Bank Bhd (AmInvestment Bank) highlighted on Serba Dinamik being in a preliminary stage of negotiations with the Sarawak state government to acquire Kuching-based Brooke Dockyard and Engineering Works Corp, as reported by The Edge Financial Daily.
“Brooke Dockyard, which has a major fabricator licence from Petronas with an annual capacity of 25,000 tonnes, is able to undertake heavy engineering works for oil & gas offshore modules, substructures and ship building,” AmInvestment Bank said.
“Even though Serba Dinamik has its RM259 milliion Bintulu Integrated Energy Hub in Tanjung Kidurong to service engineering, procurement, fabrication, operation and management projects in Sarawak, this facility does not have drydock capabilities to undertake vessels or large topside modules.
“Hence, Brooke Dockyard could strategically transform Serba Dinamik’s offshore fabrication capability to a new level while complementing its operation and maintenance activities for Sarawak and the Middle East.”
AmInvestment Bank noted that the financially distressed dockyard, which has incurred RM100 million losses on a contract, is being offered to Serba Dinamik at a pricey RM150 million. The research firm also noted that Brooke Dockyard’s debt has not been revealed at this stage.
“Measured against its yard size, the offer price translates to RM86 per square foot (psf) - this is 54 per cent above Malaysia Marine and Heavy Engineering Holdings Bhd’s RM56 psf currently based on its market capitalisation. At the current offer price, we would not be in favour of Serba Dinamik acquiring Brooke Dockyard unless the acquiree has managed to secure substantial contracts to support a value-accretive proposition.
“However, we are skeptical that Petronas would be willing to award huge contracts unless Brook Dockyard had demonstrated good and timely execution on its projects.”