INTER-PACIFIC Research Sdn Bhd tweaked its earnings forecast for Serba Dinamik Holdings Bhd by 2.6% higher for its calendar year 2021 (CY21) on the premise of stronger topline growth after the group bagged 11 contracts worth RM548.2 million.
The broker maintained its ‘Buy’ call for Serba Dinamik with a higher target price of RM2.48 from RM2.42 previously, derived from an unchanged 12.5 times target price-to-earnings ratio pegged to its diluted CY21 earnings per share estimate of 19.9 sen from 19.4 sen.
“We are tweaking our forecast higher premised on stronger topline growth than previously expected, taking a median approach considering the pandemic impact and vaccine recovery potential on Serba Dinamik’s earnings growth,” it said in a note yesterday.
Serba Dinamik secured eight operations and maintenance (O&M) contracts in Indonesia and an information, communication and technology contract in India. The remaining two local job wins are on a call-out basis with no specific contract value.
Of the O&M contracts awarded, five are power-related contracts awarded by PT Pilar Bahtera Energi, which is estimated to worth RM320 million with a tenure of 15 years each through November 2035.
Inter-Pacific estimated each contract will contribute over RM4 million to the group’s topline per year, with a potential gross margin of around 15%.
“Serba Dinamik also bagged a four-year contract for the implementation of smart solutions for the development of smart city from Captive Technology Solutions Pte Ltd in India, worth RM200 million that may generate a gross margin of 20%,” it said.
On the local jobs, Serba Dinamik was awarded contracts from Petroliam Nasional Bhd and Sarawak Shell Bhd.
The engineering, procurement, construction and commissioning contract is on a call-out basis from Sarawak Shell for the design, supply, delivery and commissioning of diesel generators worth about RM10 million.
A meeting held earlier this month between the research firm and Serba Dinamik management revealed that the group’s tender book value currently stands at RM20 billion.
“We assume a 40%-win rate, which equates to RM8 billion in new job wins. Factoring in an orderbook burn rate of RM6.5 billion for CY21, this will yield a year-end target of RM20 billion order- book value, an implied 8% on yearly orderbook growth rate,” it added.
Serba Dinamik’s share price closed 1.23% or two sen higher at RM1.64 yesterday, bringing its market value to RM5.56 billion.
Source: The Malaysian Reserve
Issued Date: 20th Jan 2021