Will Serba’s major shareholders ever consider taking company private?

CAN prospect of privatisation be looming in Serba Dinamik Holdings Bhd given that the patience of its major shareholders may be thinning having to watch the company’s share price stagnating at the 40 sen zone since end-July?

Obviously it pains the heart to be watching from the sidelines the gloom more so as the stock price of the global integrated oil & gas (O&G) outfit remains range-bound even as the FBM KLCI has shown some uptrend since the appointment of Malaysia’s ninth Prime Minister on Aug 20.

Delving on the privatisation, a market observer contended that although the share price of Serba Dinamik has been badly hit due to governance issue emanating from the flagging of accounting discrepancies in its FY2020 financials by former external auditor KPMG PLT, the company’s fundamentals seem to remain intact with an outstanding order book.

In recent times, Serba Dinamik has secured 15 new contracts with 10 operation and maintenance (O&M) projects in Malaysia and Indonesia, and five engineering, procurement, construction and commissioning (EPCC) contracts in Malaysia and Nepal.

According to PublicInvest Research analyst Nurzulaikha Azali in her research note dated Aug 12, the contracts are valued at circa RM386.3 mil, hence able to improve Serba Dinamik’s earnings visibility to a healthy order book of RM18 bil.

“There are bound to be ups and downs in business … based on current position, it seems that Serba is too big to fail given it has played a big role in Malaysia’s oil and gas (O&G) industry and particularly so as a vendor development partner for the national oil corporation (PETRONAS),” opined a market observer.

“Henceforth, at its current valuation, it is not surprising that Serba’s major shareholders may contemplate taking Serba private on the basis that its valuation is too cheap to be ignored.”

The company’s five major shareholders as of Sept 10 are its founder, CEO and group managing director Datuk Dr Mohd Abdul Karim Abdullah (20.9%), the company’s non-independent non-executive director Datuk Abdul Kadier Sahib (16.18%), the Employees Provident Fund (4.97%), the Retirement Fund (Inc) (4.53%) and Permodalan Nasional Bhd (4.34%).

“Technically, Serba’s current valuation is at three times PE (price-to-earnings) compared to the industry’s average at six to seven times while its latest NTA (net tangible asset) value is a mere 1.05,” the market observer pointed out.

“All this gives credence that privatisation cannot be ruled out given such move will open up prospect of a better return to the company’s major shareholders”.

Assuming the prospect of privatisation is on the card, the market observer added he will not be surprised if the share price of Serba Dinamik “is able to double up from its current price”.

At 10.53am, Serba Dinamik was unchanged at 38.5 sen with 5.92 million shares traded, thus valuing the company at RM1.44 bil. – Sept 10, 2021

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