Kenanga Research said this in a report to clients yesterday, noting that despite being a mostly challenging quarter for the oil and gas industry, as well as the overall global economy due to the impact of lockdowns amidst the Covid-19 pandemic, Serba had “proven once again its earnings base resiliency
PETALING JAYA: The successful execution of oil and gas company Serba Dinamik Holdings Bhd’s orderbook of RM18.5bil should continue fuelling its short-term earnings growth, while the group’s ventures into offshore fabrication as well as expansion of its ICT segment are its longer-term growth plans.
Kenanga Research said this in a report to clients yesterday, noting that despite being a mostly challenging quarter for the oil and gas industry, as well as the overall global economy due to the impact of lockdowns amidst the Covid-19 pandemic, Serba had “proven once again its earnings base resiliency by being able to continue delivering earnings growth.”
Serba on Monday reported a net profit which was 13% higher at RM147.88mil for the second quarter ended June 30,2020 (Q2FY20), compared with RM130.44mil a year ago, due largely to to a higher contribution from its operations and maintenance (O&M) segment.
Kenanga, which has maintained its “outperform” call on the company, said it continues to like Serba given its superb record of earnings delivery and proven resiliency.
“With only about 40% if its orderbook exposed to oil and gas, we believe it to be one of the few resilient names among its peers to better navigate through the current oil downcycle, ” it said.
Maintaining its “buy” call on Serba, AmResearch in its note to clients noted that Serba’s outstanding order book has surged by 9% quarter-on-quarter to RM18.5bil currently with the recent award of another substantive construction project in Abu Dhabi, United Arab Emirates worth US$350mil (RM1.5bil) from Future Digital Data Systems LLC (FDDS) to design, procure and construct a data centre together with infrastructure and landscaping works.
“This already exceeds its FY2020 year-end target of RM15bil, ” the research outfit said.
Notwithstanding Middle Eastern losses incurred by other Malaysian-based construction companies in the past, the group remains confident of executing these huge Abu Dhabi projects given that its managing director Datuk Mohd Abdul Karim, with his savvy business network, has successfully completed multiple oil and gas jobs in the region with commendable profit margins over the past 10 years, said AmResearch.
“As such, the group’s good earnings visibility, together with its recurring income profile and improving balance sheet risks translate to an unjustified FY2021 price earnings of only nine times versus its closest peer Dialog Group Bhd’s over 30 times.
At the finish yesterday, Serba’s stock ended two sen higher at RM1.75, valuing the entire company at close to RM6bil.