SERBA Dinamik Holdings Bhd’s securing of 15 new oil & gas (O&G) service contracts valued at RM386.3 mil is expected to improve the company’s future earnings visibility with a healthy order book of RM18 bil.
While investors can be positive about the company’s fundamental as they await the outcome from Ernst & Young Consulting Sdn Bhd’s (EY) special independent review, PublicInvest Research is of the view that issues surrounding its on-going statutory audit would hinder Serba Dinamik’s near-term prospects.
“(Elsewhere), concerns over corporate governance as well as the tight deadline for submission of its 2020 Annual Report may continue to cloud (prospects) until they are convincingly addressed,” opined analyst Nurzulaikha Azali in a company update.
“We understand that the group will release its 6Q FY2021 results in September. Therefore, our target price of 44 sen (with a “neutral” rating) based on a discount of 50% to its trailing 12-month book value of 0.88 remains unchanged.”
To re-cap, the global integrated oil & gas (O&G) service provider announced yesterday (Aug 11) that the company through its Malaysian and Indonesian subsidiaries, has recently secured contracts in the areas of operations & maintenance (O&M) and engineering, procurement, construction and commissioning (EPCC).
The contracts’ lifespans vary with completion up to 2025. The projects are estimated to yield 17% profit margin at the gross level, according to PublicInvest Research.
“With this contract, Serba has successfully secured a total of RM1.4 bil worth of projects from January to-date, maintaining its order book balance at around RM18 bil with earnings visibility up to three years based on 12-month FY2020 revenue,” noted the research house.
Currently, Serba Dinamik’s EPCC segment makes up 47% of its total order book, followed by O&M at 42% and ICT at 11%.
While no specific value on order book target for CY2021 has been given, the management had earlier this year maintained its optimistic view to grow its order book or at least to maintain its balance order book by end-2021.
“Nevertheless, COVID-19 has affected the group’s bids in the tender process globally though we think this could also have been affected by the existing statutory audit and corporate governance-related issues,” added PublicInvest Research.
Recall that the group has exceeded its CY2020 year-end balance order book target of RM15 bil despite the global economic downturn due to the COVID-19 outbreak.
At 9.46am, Serba Dinamik was up 1.5 sen or 3.75% to 41.5 sen with 22.03 million shares traded, thus valuing the company at RM1.55 bil. – Aug 12, 2021
