Kenanga positive on Serba Dinamik stake purchase in CSE
KUALA LUMPUR (16 Apr 2018): Kenanga Research is positive on Serba Dinamik Holdings Bhd’s 24.8% stake acquisition in CSE Global Ltd for a total S$57.7mil cash.
The research firm said the stake purchase in the Singapore-listed company will expand Serba Dinamik’s geographical footprint given that it has a presence in more than 20 countries.
“Post-acquisition, we adjusted our FY18-19E earnings by 1.4% while net gearing level remains healthy at 0.23x. All in, OP call maintained with higher TP of RM3.95/share, pegged to 15.0x FY18E PER,” it said in its Monday report.
It said the purchase may also strengthen its capability in IT-related services by potentially integrating CSE’s various IT solution platforms, which include systems automation, integration and packages.
Figure 1: A group photo of Group Chief Executive Officer/Group Managing Director of Serba Dinamik, Dato Dr. Ir. Mohd Abdul Karim Abdullah (second from right) and Chairman of StartUp Borneo, Abdul Qaiyum Alidin (third from right).
“SERBADK could also tap its know-how on incinerator technology to enhance its capabilities in sewerage treatment projects,” it added.
Kenanga Research said CSE has an improving outlook with recorded core earnings of S$13.3mil after stripping off several extraordinary items amounting to S$58.5mil in FY17 while its net assets stood at S$174mil as of end-FY17.
“While the valuation may appear to be high, the management is confident that the outlook is improving with potential new orders from greenfield (comprises new installations) and brownfield (comprises maintenance, upgrade and enhancement of existing installations) projects.”
Kenanga Research maintained its outperform call on Serba Dinamik with a higher target price of RM3.95 from RM3.90 pegged to an unchanged FY18E price-earnings of 15.0x.[Source: “Kenanga positive on Serba Dinamik stake purchase in CSE” published by The Star Online/Star Media Group Berhad]