Serba Dinamik bulking up
KUALA LUMPUR (June 2): IN a move that will fortify its position as a global, integrated engineering services provider, Serba Dinamik Holdings Bhd has been on a slew of mergers and acquisitions (M&A) in the first half of the year.
This, coupled with a sustainable asset ownership model, will support Serba Dinamik’s growth going forward.
Serba Dinamik is involved in operations and maintenance (O&M) as well as engineering, procurement, construction, and commissioning (EPCC) works.
Serba Dinamik managing director and CEO Datuk Karim Abdullah tells StarBizWeek that the group intends to expand revenue contribution from its other segments, particularly power generation.
Figure 1: Karim: We have a hydropower plant project in Kota Marudu, Sabah, where the EPCC work is contributing a revenue of RM218mil.
“We have a hydropower plant project in Kota Marudu, Sabah, where the EPCC work is contributing a revenue of RM218mil.
“We are also in the midst of working out the regulatory requirements on another hydropower plant project, which has a cumulative capacity of 60MW.
“This EPCC contract is valued at RM560mil, which we are partnering with Maju Holdings Sdn Bhd and Perak Hydro Renewable Energy Corporation Sdn Bhd,” he says.
As for water utility, Serba Dinamik has yet to make any significant inroads, save for the Konsortium Amanie Joint Venture that is part of the Kuala Terengganu Utara Water Supply Scheme.
When Serba Dinamik signs up for a power plant contract, both EPCC and O&M contracts are usually signed together.
The typical duration of an O&M contract for power plants is 21 years.
Acquisition spree
During the first half of the year, Serba Dinamik has since announced three acquisitions, namely, KB Engineering Coatings Sdn Bhd, United Arab Emirates (UAE)’s Al Sagar Engineering LLC, and Singapore’s CSE Global Ltd.
CSE is the group’s largest acquisition to date, priced at SG$57.67mil (RM170.57mil) for a 24.84% stake.
“We will be the single largest shareholder in CSE, after the acquisition is complete.
“This acquisition gives us access to CSE’s geographical coverage and in-house engineering capabilities.
“CSE’s engineering capabilities shall enhance our offerings, providing a more complete solution to our operations in the Middle East as well as Malaysia.
“Additionally, CSE is present in four locations that are of interest to Serba Dinamik as we do not cover these locations currently.
“These locations are Houston, Mexico, Australia, and New Zealand,” Karim explains, adding that the acquisition fulfils Serba Dinamik’s recognition as a multinational company.
Serba Dinamik will also obtain two board seats and place one management representative in CSE.
Then, there is the acquisition of Al Sagar Engineering Group LLC and Al Sagar National Establishment, whereby Serba Dinamik will acquire 49% equity for a total cash consideration of AED10mil (RM10.54mil).
“We are keen on Al Sagar due to its three licenses in oil and gas, power generation, as well as water and utility segments, that allow it to operate across UAE.
“With this acquisition in hand, we expect to see a larger revenue contribution from UAE going forward,” says Karim.
As of the financial year ended December 31, 2017 (FY17), revenue contribution from the Middle East was the largest, making up 59.2% of total revenue.
Meanwhile, the 100% share capital acquisition of KB Engineering for RM2mil, which has been completed, shall add on to Serba Dinamik’s engineering scope.
KB Engineering specialises in coating corrosion protection.
Going into the second half of the year, Karim says there should be a slower momentum of M&A.
“If we are announcing any, it would be small acquisitions priced within the range of RM10mil to RM20mil.
“These would be small acquisitions of technology companies, that would help grow our integrated solutions.
“No big acquisitions, because we want to focus on what we have at the moment, nurture it and bring in the business that is required, based on the intention and objective of the acquisitions,” he says.
M&A exercises aside, the Main Market-listed company is also due to commence earthworks in July for the maintenance, repair and overhaul (MRO) zone in Pengerang Eco Industrial Park (PEIP).
PEIP is a development in Pengerang that shall support the activities of oil and gas companies.
Serba Dinamik, under a partnership with Perisind Samudra Sdn Bhd, will develop the MRO zone as well as the inspection, repair, and maintenance (IRM) Global Centre of Excellence for RM1.5bil.
The development on the 25-hectare land will be undertaken in three phases.
Meanwhile, Serba Dinamik has received offers to develop the Pengerang International Commercial Centre (PICC) and are still in talks with the interested parties.
PICC shall comprise commercial properties and hotels.
The group has an orderbook of RM6.2bil to date, which will last for two to three years.
Karim says that the group is towards achieving a double digit orderbook growth, anchoring on the O&M segment as the revenue driver, as well as growing more revenue from the EPCC segment in Malaysia and the Middle East.
Serba Dinamik’s tenderbook amounts to RM13bil and has a success rate of 20% to 30%, traditionally.
In FY17, the gross profit margins for O&M and EPCC were 17.9% and 16.8%, respectively.
Serba Dinamik registered a net profit of RM310.02mil in FY17, on the back of a revenue of RM2.71bil.
As of December 31, 2017, Serba Dinamik’s gearing ratio was 0.5 times.
Following the private placement of RM434mil, the net gearing of Serba Dinamik has been reduced to 0.06 times.
Karim explains that the nature of O&M is that it is working capital-intensive.
“The cash upfront requirement is high for O&M jobs, but short term in nature.
“Hence, the group has a larger proportion of short-term borrowings,” he says, adding that any additional capital required shall be raised via debts in terms of sukuk.
Serba Dinamik closed at RM3.30 on Friday, with a price-earnings ratio of 13.82 times and a market capitalisation of RM4.85bil.
Previously, the share price took a hit after the general election, dropping 9.3% to RM3.12 on May 14.
“We are a politically neutral company, and bid for jobs according to our professional engineering capabilities.
“While we started our operations in Sarawak, we do not have any ties to any political party. We are building up a multinational company and have projects across the world,” says Karim.
[Source: “Serba Dinamik bulking up” published by The Star Online/Star Media Group Berhad]Photo Credits: The Star Online/Star Media Group Berhad
