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Wednesday, 26 August 2020

About the same time when acquiring KPower shares, Datuk Abdul Karim of Serba Dinamik emerged as a controlling shareholder of Sarawak Consolidated Industries Berhad (SCIB).

SCIB's share price responded by surging from around 60sen in May19 to RM3.50 in Feb20. Covid-19 bear market dragged it down to RM1 and currently it recovers to RM3 level.
 SCIB plans private placement to raise RM66.5m to fund future ...
SCIB plans private placement to raise RM66.5m to fund future ...

Before the change in major shareholders, SCIB was a struggling loss-making company.

Similar to KPower, I didn't have interest in this kind of loss-making company when the visibility of earning is in doubt.

However, studying KPower in late May20 inevitably brought me to SCIB, and I found that SCIB is an even more exciting company.

SCIB has been awarded a RM864.5mil contract in Oman & Qatar during MCO period in Apr20. It has already bagged RM175mil contract earlier in Q4 of CY2019.

This makes it over RM1 billion contract for a company with an annual revenue of RM80mil.

A more interesting part is, all these contracts are short term of within a year.

SCIB contracts

25/10/19 RM117.2mil:
Oct19 - May20 (Indon)
Oct19 - Oct20 (Qatar)
Oct19 - Oct20 (Oman)

25/10/19 RM58.2mil: Nov19 - Jun20 (Mas)

3/4/20 RM864.5mil (USD200.45mil): Apr20 - Apr21 (Oman & Qatar)

Last week, it announced a few more contracts worth RM707mil. This makes its total contract won so far at RM1.747 billion.

RM608mil (USD145mil): Oct20 - Sep24 (UAE)
RM43.9mil: Oct20 - May21 (Mas)
RM55.6mil (USD13.3mil): Oct20 - Apr21 (Indon)

Total contracts RM1.747 billion

Outstanding shares 85.88mil before private placement
36.75mil private placement @ RM1.82 (42.8%)
Total shares 122.63 mil after private placement

In the last two quarters from FY19Q4 to FY20Q1 when the contracts started to run, construction segment has contributed only RM44mil revenue and RM5.7mil EBIDTA.

So it's not a surprise to see SCIB's total revenue at RM800mil in subsequent four quarters.

Investors will be worried whether the contracts will dry up after one year. This is a real concern.

Nevertheless, SCIB has earlier announced that it is "expected" to secure contracts worth RM1.37bil with tenures between 24-36 months from Serba Dinamik.

A total of RM651mil has been awarded by Serba Dinamik last week, but the duration of the RM608mil contract in UAE is 48 months.

The new management reveals that SCIB is in the process of obtaining license from Petronas for oil & gas related infrastructure jobs, while also actively looking to acquire another company with such license.

In Mac20, The Edge Weekly reported that SCIB has a tender book of RM4.5bil. Datuk Abdul Karim said that FY2020 will act as a benchmark and the company is targeted to grow 15-20% per year thereafter.

In order to attract institutional investors, he hopes to get SCIB's market cap past RM1 billion mark in 2 years time. In order to do that, SCIB's share price has to be at least RM8.15!

The Edge Weekly: SCIB Goes Global

Unlike KPower who has little relation with construction industry prior to the takeover apart from its small property development, SCIB's core business is the manufacturing of various precast concrete products used in construction industry & Industrialised Building System.

It has 3 factories in Kuching, Sarawak and mainly supplies to construction projects in Sarawak.

The new management has plan to make SCIB into an EPCC or EMCC (Engineering, Manufacturing, Construction & Commissioning) company and expand its reach to other states in Malaysia and overseas.

It has already done so with such contracts from Indonesia & Middle East. It's no longer confined to Sarawak as its name suggests.

Its concrete manufacturing business posted RM3.1mil of EBIDTA in FY2019. It is expected to perform better and double the order books in the future as concrete components of construction projects from KPower, Serbadk & SCIB itself are likely to be sourced from it.

SCIB aims to expand presence beyond Malaysia | Borneo Post Online
 SCIB aims to expand presence beyond Malaysia | Borneo Post Online
With both cylinders of construction & manufacturing arms firing together, there is no doubt that SCIB's revenue and profit will grow by leaps and bounds in the coming quarters, despite the progress might be slowed down by the pandemic lockdown.

After the recent contracts, it has already fulfilled the internal target of RM1.5 billion in 2020.

SCIB has just completed a private placement to raise the much needed cash of RM66.9mil to carry out its sizable construction works.

A new dividend payout policy of at least 30% is an icing on the cake. This is higher than KPower's 20% payout. It might follow Serbadk to declare dividend every quarter in the future.

SCIB has low liquidity with just 122.6mil outstanding shares even after the private placement. While it does not have the ability to do bonus issue, share split like KPower is an option if it is to improve the liquidity.

I have a feeling that SCIB will be Serba Dinamik 2.0. That's why I decided to invest in it.

Nothing is without risk though. Please invest at own risk.

Posted by Bursa Dummy


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