IF WE WERE TO FIND THE NEXT LIMIT UP STOCK, THIS COULD BE THE ONE BECAUSE MARKET HAS UNDERRATED IT TOO MUCH!
I have repeatedly highlighted Serba Dinamik. Yet, retailers keep selling it because lack of knowledge while Institutionals have been aggressively accumulating the stock at this level.
Unlike Hibiscus, Sapnrg, Velesto, Yinson, Armada, Perdana, Petra that are directly exposed to oil prices and jobs that depends oil majors capex, Serba Dinamik has no exposure to oil prices because it does maintenance in the O&G industry. Oil majors need to maintain their production lines because they are running 24 hours no matter lower oil prices.
(A) The oil price crash will not impact Serba Dinamik in terms of future new contracts although oil majors could reduce their capex but not opex (for maintenance) , because:
maintenance works will still be required in the current market situation — where Saudi Arabia plans to increase production, which will result in more wear and tear and, subsequently more maintenance works are needed from Serba Dinamik. FYI, Saudi is the largest oil exporter to China and now, China’s economy will swiftly return to its potential growth rate (https://www.klsescreener.com/v2/news/view/654878)
The Group also involves in critical areas of the O&G industry to ensure minimal or no disruption to oil majors operations. So, maintenance works are still required as long as productions are on-going.
little concern on margin pressure because based on their experience, the reduction will not be so sizeable during the previous oil downturn (2014).
In terms of the Group’s gearing, most of its debt are long-term basis. No concern at all. Its short-term debt was only RM404m while it has RM1.3b cash, which implies 3.2x cover. Its cash flow always positive and cash generative.
(B) FY20-21 earnings visibility are secured. The Group currently has an outstanding orderbook of RM10.7b, which will be more than enough to cover for two years. It can even potentially charting another new profit height this year despite the global business slowdown.
(C) Its orderbook target of RM15b by end-2020 remains intact with crucial maintenance works and with the Pengerang Integrated Complex starting up.
(D) ALL brokers in town have maintained their BUY calls on the stock with FY20 TP in a range of at least RM2.50 to RM3.05.