Serba Dinamik Holdings Bhd
(July 9, RM4.14)
Maintain buy with an unchanged fair value (FV) of RM6.50: We maintain our “buy” call on Serba Dinamik Holdings Bhd with an unchanged sum-of-parts-based (SoP) FV of RM6.50 per share, which implies a financial year 2019 forecast (FY19F) price-earnings (PE) of 20 times — 33% below Dialog Group Bhd’s 30 times, the company’s closest peer in Malaysia.

 
Serba Dinamik held an impromptu teleconference yesterday to refute rumours that the group is planning to acquire KNM Group Bhd, its equity, assets or projects.

Serba Dinamik founder and substantial shareholder Datuk Dr Mohd Abdul Karim Abdullah reaffirmed that while he is a shareholder of Sarawak Consolidated Industries Bhd (SCI) and Kumpulan Powernet Bhd, those shares are held under his own personal capacity and he does not have any operational role in them.  

Currently, SCI manufactures precast concrete products and is involved in property development in Sarawak. Powernet, in which Mohd Abdul Karim and his business partner acquired a 30% equity stake, is involved in fabric manufacturing in Bentong, Pahang and has been registering losses over the past nine years.

As SCI and Powernet are not involved in the oil and gas (O&G) business, we are glad that Serba Dinamik reaffirmed its commitment to focus on its core expertise and expand its recurring income profile.

Serba Dinamik remains on track to reach management’s outstanding order book target of RM10 billion by end-FY19F, which implies an impressive order book growth of 33% year-on-year (y-o-y).

This means that the FY19F revenue growth of 15% to 20% should be achievable. The management expects the continuation of strong revenue growth this year driven by growing demand in the Middle East and Southeast Asia, spearheaded by the United Arab Emirates and Qatar.

We remain “positive” on Serba Dinamik’s operations and maintenance business model, which is still actively expanding its long-term recurring earnings profile by strategically leveraging its engineering, procurement, construction and commissioning and ownership platform, similar to Dialog Group Bhd.

Serba Dinamik is currently trading at a grossly undervalued FY19F PE of 13 times versus over 30 times for Dialog Group — Serba Dinamik’s closest peer in the O&G sector. — AmInvestment Bank, July 9