Serba Dinamik expects earnings to grow 10%-15% in FY20 despite Covid-19 crisis.

Source: Muhammed Ahmad Hamdan on May 14, 2020 at 20:20pm +08

KUALA LUMPUR (May 14): Integrated engineering solutions provider Serba Dinamik Holdings expects its revenue and earnings to grow between 10% and 15% this year, despite the Covid-19 crisis.

Its group managing director and chief executive officer Datuk Mohd Abdul Karim Abdullah said this is in line with the group’s forecast following the government’s decision to ease restrictions under the Movement Control Order (MCO) earlier this month.

“Our projection was that if the MCO was lifted by the first week of May, we could achieve a 10%-15% growth in topline and bottomline for this year,” he said in a virtual media briefing today on the group’s recently completed RM457 million private placement exercise.

“Under the conditional MCO, which was enforced on May 4, almost all businesses are allowed to fully resume their operations, including ours. So, this means that our projection is still valid,” he added.

According to Abdul Karim, who said the group’s average annual growth stood at between 15% and 20%, Serba Dinamik’s growth target this year was set after taking into account key challenges like the prevailing low oil prices and a slowing global economy.

Serba Dinamik chalked up another record performance in its financial year ended Dec 31, 2019 (FY19), when its net profit jumped 26.87% to RM496.64 million from RM391.48 million a year ago, as revenue expanded 37.93% to RM4.53 billion from RM3.28 billion.

Given the low oil price environment, which saw US crude oil plunging below US$0 per barrel last month, Abdul Karim said the company aims to reduce its revenue contribution from the oil and gas (O&G) sector to 30% from 75%.

The company has embarked on this journey since 2017, he said, two years after the collapse of oil prices began. It is confident of achieving the 30% target over the next three years, he said, which would see contribution from its non-O&G segment rising to 70% of the group’s revenue.

“We started this journey three years ago and today, 45% of our current orderbook of RM17 billion are jobs in the O&G sector, while the remainder 55% are non-O&G,” said Abdul Karim.

“For the non-O&G segment, we mainly focus on prividing integrated IT (information technology) solutions such as the EPCC (engineering, procurement, construction and commissioning) contract we won in Abu Dhabi recently,” he added.

The EPCC is for the development of an innovation hub, academic campus, related facilities and IT infrastructure over a total built-up area of 455,000 sq m. The four-year project is worth US$1.78 billion (RM7.71 billion).

The project is undertaken by the group’s wholly-owned unit Serba Dinamik International Ltd, which accepted the letter of award on April 12 from US-based Block 7 Investments LLC.

Under its non-O&G segment, Serba Dinamik is also building a RM295.26 million chlor-alkali plant in Tanzania, which Abdul Karim said is now 60% complete. The project, which it started on in 2018, marked its first business entry into the African continent.

The chlor-alkali process is an industrial process for the electrolysis of sodium chloride. The process is used to produce chlorine and sodium hydroxide (lye/caustic soda).

“We also have a good track record in building and managing hydro power plants and will continue to look for more opportunities in this area to boost our non-O&G segment. We’re aiming for plants with a capacity of at least 15 mewagwatt.

“As for our recently-acquired University Malaysia of Computer Science and Engineering, we plan to position it among the best in Malaysia and expand its wings internationally,” said Abdul Karim of the boutique university it acquired from Prestariang Bhd earlier this year for RM2.5 million.

“Our non-O&G segment is gaining steam, as we have received enquiries from Saudi Arabia and Maldives, which has shown a very serious interest in one of our proposals,” he added.

Serba Dinamik’s ongoing jobs and projects spread across the Middle East, Europe and Southeast Asia. The group plans to use part of the RM456.7 million raised recently, as working capital for some of these projects.

The bulk of the share placement proceeds will be used to repay some of the group’s bank borrowings, as it seeks to push its gearing ratio lower.

The fund raising exercise was managed by Affin Hwang Capital and completed on April 24. It was Malaysia’s largest private placement since January 2018 and the third biggest in Southeast Asia this year.

Affin Hwang Capital’s head of equity capital markets, Arvin Chia, who joined the press briefing, said Serba Dinamik had received a strong vote of confidence from the market, despite the unfavourable economic conditions.

“Although the economy has been badly hit by the Covid-19 pandemic, there is still ample liquidity in the market. Investors are still looking to invest in good or growth companies. Serba Dinamik’s successful private placement exercise proved this,” he said.

Serba Dinamik shares closed one sen or 0.63% lower at RM1.57 today, with 6.9 million shares traded. This gave the company a market capitalisation of RM5.32 billion. Year to date, the stock has lost some 32.62% in value.

Nine out of 11 research houses rated the company with a “strong buy” and “buy”, while two each has a “hold” and “sell” call on Serba Dinamik.