Company Update
15 June 2020
Serba Dinamik Holdings OUTPERFORM ↔
Price : RM1.76
Upstream Diversification Target Price : RM2.70 ↓
By Steven Chan /
[email protected]SERBADK is seeking to acquire the Teluk Ramunia Yard Share Price Performance
from Petronas for RM320m. The acquisition would qualify
2.60
SERBADK to participate in offshore upstream fabrication
2.40
jobs, thereby placing them in direct competition against
2.20
other fabricators and offshore maintenance players such as
2.00
SAPNRG, MHB, and DAYANG. The acquisition will give
1.80
SERBADK a solid maiden footing to venture into that
1.60
space, but will slightly increase its net-gearing to 1.1x, from
1.40
1.0x currently. Maintain OUTPERFORM, but with lower TP
1.20
of RM2.70.
1.00
Acquiring Teluk Ramunia Yard from Petronas. SERBADK had
proposed to acquire the Teluk Ramunia Yard from Petronas for a total
purchase consideration of RM320m. Located in Mukim of Pantai Timur, KLCI 1,546.02
Kota Tinggi, Johor, the acquisition entails four adjoining parcels of YTD KLCI chg -2.7%
industrial land, with a total land area of 68.78 hectares, and industrial YTD stock price chg -20.0%
buildings comprising warehouses, workshops, fabrication yard and
other ancillary buildings. The yard has the capacity to perform steel Stock Information
fabrication of offshore platforms and other structures of up to 50k Shariah Compliant Yes
tonnes. Barring any unforeseen circumstances, the acquisition is Bloomberg Ticker SDH MK Equity
expected to be completed by 3QFY20. Market Cap (RM m) 5,934.0
Shares Outstanding 3,371.6
Enables venture into offshore upstream fabrications. The
52-week range (H) 2.52
acquisition is expected to play a significant role in the company’s
52-week range (L) 1.02
maiden step into the offshore upstream fabrications space. The yard
3-mth avg daily vol: 19,685,200
will qualify SERBADK to participate in various jobs, such as
Free Float 52%
decommissioning, offshore transport and installation (T&I), integrated
Beta 1.5
hook-up and commissioning (i-HUC), and top side maintenance. This
would place SERBADK in direct competition with other fabricators and Major Shareholders
offshore maintenance providers, such as SAPNRG, MHB, and
Abdullah Mohd Abdul 21.5%
DAYANG.
Sahib Abdul Kadier 17.6%
As a comparison, this yard has less than half the capacity of MHB’s Employees Provident Fund 8.7%
fabrication yard in Johor, and SAPNRG’s yard in Lumut – both of which
has an annual fabrication capacity of well over 100k MT. Nonetheless, Summary Earnings Table
we deem this to be more than adequate to help kick-start SERBADK’s FYE Dec (RM m) 2019A 2020E 2021E
venture into this space. Additionally, the yard’s proximity to Petronas’ Revenue 4528.6 5207.9 5989.1
RAPID project, as well as to Batam Island may also provide a EBIT 692.6 781.2 898.4
competitive edge when it comes to job bidding. Profit Before Tax 544.8 604.9 678.0
Net Profit 496.6 544.4 610.2
We expect this venture to bear fruition in the coming 12-18 months.
Core Net Profit 496.6 544.4 610.2
Financial impacts from the acquisition. The acquisition is expected Consensus (CNP) 571.5 661.7
to slightly raise SERBADK’s net-gearing to 1.1x, from 1.0x currently. Earnings Revision (%) -3.0 -3.2
Additionally, the acquisition may also incur additional finance costs of Core EPS (sen) 14.7 16.1 18.1
up to ~RM20m/year, before being offset by earnings as the venture Core NP growth (%) 26.9 9.6 12.1
bears fruit over the next 12-18 months. In the meantime, the group is DPS (sen) 4.5 4.8 5.4
seeking to lease out parts of the yard to help partially subsidise these BV/Share (RM) 0.7 0.9 1.2
fixed costs. PER (x) 11.9 10.9 9.7
Price/BV (x) 2.4 1.9 1.5
Valuation-wise, we believe the acquisition price is also relatively fair. Net Gearing (x) 0.8 0.8 0.6
The acquisition consideration of RM320m is below its market price of Div Yield (%) 2.5 2.8 3.1
RM335m as ascribed by the independent valuer. Comparatively, the
acquisition implies a valuation of RM1.9m/acre – slightly higher than the
valuation ascribed for DIALOG’s Pengerang land bank at RM1.7m/acre
in our SoP for DIALOG, but do note that this acquisition comes with
ready functioning facilities.
PP7004/02/2013(031762) Page 1 of 5
Serba Dinamik Holdings Company Update
15 June 2020
Maintain OUTPERFORM. Overall, we are cautiously optimistic on SERBADK’s efforts in venturing into the offshore space,
allowing it to broaden its earnings base from the current downstream exposure. However, as similarly witnessed from its other
offshore peers, this may inject a degree of volatility into its earnings.
We conservatively lowered our FY20-21E earnings by 3% each, accounting for the higher finance costs, resulting in a lower TP
of RM2.70 (from RM2.80 previously). Valuation remains unchanged at 15x PER on FY21E EPS.
Nonetheless, we continue to like SERBADK given its current earnings resiliency despite the oil down-cycle. Further
materialisation of contract wins, and continued delivery of earnings growth will remain as catalysts moving forward.
Risks to our call include: (i) lower-than-expected order-book replenishment, (ii) weaker-than-expected margins, (iii) project
execution and delivery.
This space is intentionally left blank
PP7004/02/2013(031762) Page 2 of 5
Serba Dinamik Holdings Company Update
15 June 2020
Income Statement Financial Data & Ratios
FY Dec (RM m) 2017A 2018A 2019A 2020E 2021E FY Dec 2017A 2018A 2019A 2020E 2021E
Revenue 2722.3 3283.2 4528.6 5207.9 5989.1 Growth (%)
Operating Profit 394.1 473.3 692.6 781.2 898.4 Revenue 25.5 20.6 37.9 15.0 15.0
Interest Exp (33.9) (49.6) (182.8) (206.3) (250.3) Op. Profit 30.1 20.1 46.3 12.8 15.0
PBT 358.1 437.6 544.8 604.9 678.0 PBT 33.6 22.2 24.5 11.0 12.1
Taxation (41.3) (44.8) (46.8) (60.5) (67.8) Net Profit 25.2 27.1 26.9 9.6 12.1
Minority Interest 3.3 (1.4) (1.3) 0.0 0.0
Net Profit 308.1 391.5 496.6 544.4 610.2 Profitability (%)
Core Net Profit 308.1 391.5 496.6 544.4 610.2 Operating Margin 14.5 14.4 15.3 15.0 15.0
PBT Margin 13.2 13.3 12.0 11.6 11.3
Balance Sheet Net Margin 11.3 11.9 11.0 10.5 10.2
FY Dec (RM m) 2017A 2018A 2019A 2020E 2021E Effective Tax Rate 11.5 10.2 8.6 10.0 10.0
Fixed Assets 646.9 1,273.1 1,928.7 2,728.7 3,528.7 ROA 12.3 9.0 7.8 6.9 6.4
Int. Assets 3.8 6.4 13.2 13.2 13.2 ROE 22.2 18.7 20.4 17.3 15.5
Inv. in associate. 44.1 305.9 391.8 391.8 391.8
Other LT assets 3.1 1.0 5.3 5.3 5.3 DuPont Analysis
Inventories 581.1 848.3 919.6 1,057.5 1,057.5 Net Margin (%) 11.3 11.9 11.0 10.5 10.2
Receivables 854.9 957.3 1,265.2 1,454.9 1,454.9 Assets T/O (x) 1.1 0.8 0.7 0.7 0.6
Other CA 83.5 218.0 523.8 523.8 523.8 Lev. Factor (x) 1.8 2.1 2.6 2.5 2.4
Cash 293.2 760.8 1,306.6 1,750.5 2,543.8 ROE (%) 22.2 18.7 20.4 17.3 15.5
Total Assets 2,510.7 4,370.8 6,354.2 7,925.8 9,519.1
Leverage
Payables 369.3 426.5 426.5 490.5 490.5 Debt/Asset (x) 0.3 0.4 0.5 0.5 0.5
ST Borrowings 604.9 604.0 404.7 415.1 495.1 Debt/Equity (x) 0.50 0.8 1.4 1.3 1.3
Other ST Liabil. 47.4 54.0 89.7 89.7 89.7 Net (Cash)/Debt 396.4 950.7 2044.8 2400.9 2407.6
LT Borrowings 84.7 1,107.5 2,946.7 3,736.3 4,456.3 Net Debt/Eq. (x) 0.3 0.5 0.8 0.8 0.6
Other LT Liabil. 13.3 86.5 46.7 46.7 46.7
Minorities Int. 4.4 4.1 7.2 7.2 7.2 Valuations
Net Assets 1,386.7 2,088.2 2,432.7 3,140.4 3,933.7 EPS (sen) 9.1 11.6 14.7 16.1 18.1
GDPS (sen) 2.7 3.5 4.5 4.8 5.4
Share Capital 929.2 1,334.3 1,344.3 1,344.3 1,344.3 BVPS (RM) 0.4 0.6 0.7 0.9 1.2
Reserves 457.5 753.8 1,088.4 1,796.1 2,589.4 PER (x) 19.3 15.2 11.9 10.9 9.7
Equity 1,386.7 2,088.2 2,432.7 3,140.4 3,933.7 Div Yield (%) 1.5 2.0 2.5 2.8 3.1
P/BV (x) 4.3 2.8 2.4 1.9 1.5
Cashflow Statement
FY Dec (RM m) 2017A 2018A 2019A 2020E 2021E
Operating CF 88.8 83.2 212.6 514.4 580.2
Investing CF (255.2) (858.6) (890.8) (800.0) (800.0)
Financing CF 281.2 1,242.7 1,311.6 729.6 1,013.1
Source: Kenanga Research
b
Fwd PER Band Fwd PBV Band
Price (RM) PER 0.0 x PER 3.6 x PER 7.2 x PER 10.8 x PER 14.4 x Price (RM) PBV 1.2 x PBV 1.6 x PBV 2.0 x PBV 2.4 x PBV 2.8 x
2.40
2.40
2.20 2.20
2.00 2.00
1.80 1.80
1.60 1.60
1.40 1.40
1.20 1.20
1.00
1.00
0.80
0.80
Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20
Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20
Source: Bloomberg, Kenanga Research
PP7004/02/2013(031762) Page 3 of 5
Serba Dinamik Holdings Company Update
15 June 2020
Peer Comparison
Net
Last Revenue Core Earnings PER (x) - Core ROE
Name Market Shariah Current PBV (x) Div.Yld. Target Rating
Price Growth Growth Earnings (%)
(%)
Cap 1-Yr. 2-Yr. 1-Yr. 2-Yr. 1-Yr. 2-Yr. 1-Yr. 1-Yr. 1-Yr. Price
(RM) Compliant FYE Hist. Hist.
(RM'm) Fwd. Fwd. Fwd. Fwd. Fwd. Fwd. Fwd. Fwd. Fwd. (RM)
BUMI ARMADA BHD 0.230 1,353.8 N 12/2020 1.4% 4.8% 10.3% 12.5% 4.8 4.3 3.9 0.4 0.4 9.2% 0.0% 0.300 OP
DAYANG ENTERPRISE HLDGS BHD 1.28 1,393.2 Y 12/2020 8.7% 9.0% 8.6% 9.9% 6.9 6.3 5.8 1.0 0.9 15.0% 0.0% 1.30 UP
DIALOG GROUP BHD 3.67 20,692.6 Y 06/2020 17.7% 6.1% 4.5% 9.7% 38.6 37.0 33.7 5.5 5.2 14.4% 1.1% 4.15 OP
MALAYSIA MARINE AND HEAVY EN 0.450 720.0 Y 12/2020 3.2% 28.4% -72.2% 23.2% N.A. 75.8 61.5 0.3 0.3 0.4% 0.0% 0.450 MP
MISC BHD 8.22 36,692.0 Y 12/2020 3.4% 5.4% 33.2% -19.5% 22.8 17.1 21.3 1.1 1.0 6.1% 3.6% 8.85 OP
PANTECH GROUP HOLDINGS BHD 0.375 278.5 Y 02/2020 -41.9% 57.1% -47.6% 79.8% 8.5 16.2 9.0 0.5 0.5 2.8% 2.7% 0.310 UP
PETRONAS CHEMICALS GROUP BHD 6.87 54,960.0 Y 12/2020 -16.5% 10.4% -33.1% 36.2% 19.5 29.2 21.4 1.8 1.8 6.2% 1.7% 5.75 MP
PETRONAS DAGANGAN BHD 22.00 21,856.0 Y 12/2020 -16.7% 12.2% -42.7% 68.5% 26.7 46.5 27.6 3.7 3.6 7.8% 1.7% 17.95 UP
SAPURA ENERGY BHD 0.095 1,518.0 Y 01/2021 -11.4% 10.8% -173.7% -223.0% N.A. N.A. N.A. 0.2 0.2 -11.2% 0.0% 0.050 UP
SERBA DINAMIK HOLDINGS 1.76 5,934.0 Y 12/2020 15.0% 15.0% 9.6% 12.1% 11.9 10.9 9.7 2.4 1.9 19.5% 3.1% 2.70 OP
UZMA BHD 0.605 193.6 Y 06/2020 14.6% 2.3% 186.6% 10.1% 20.0 7.0 6.3 0.4 0.4 5.6% 0.0% 0.670 MP
VELESTO ENERGY BHD 0.160 1,314.5 Y 12/2020 -9.9% 0.0% -19.4% 24.4% 41.1 50.9 41.0 0.5 0.5 0.9% 0.0% 0.140 UP
WAH SEONG CORP BHD 0.540 418.1 Y 12/2020 -56.3% 45.5% -203.6% -148.5% 6.0 N.A. N.A. 0.4 0.4 -7.2% 0.0% 0.510 UP
YINSON HOLDINGS BHD 6.31 6,724.3 Y 01/2021 -30.0% -1.1% 46.8% 6.2% 31.3 21.4 20.1 4.2 3.6 18.3% 1.0% 6.55 OP
Simple Average -8.5% 14.7% -20.9% -7.0% 19.8 26.9 21.8 1.6 1.5 6.3% 1.1%
Source: Bloomberg, Kenanga Research
PP7004/02/2013(031762) Page 4 of 5
Serba Dinamik Holdings Company Update
15 June 2020
Stock Ratings are defined as follows:
Stock Recommendations
OUTPERFORM : A particular stock’s Expected Total Return is MORE than 10%
MARKET PERFORM : A particular stock’s Expected Total Return is WITHIN the range of -5% to 10%
UNDERPERFORM : A particular stock’s Expected Total Return is LESS than -5%
Sector Recommendations***
OVERWEIGHT : A particular sector’s Expected Total Return is MORE than 10%
NEUTRAL : A particular sector’s Expected Total Return is WITHIN the range of -5% to 10%
UNDERWEIGHT : A particular sector’s Expected Total Return is LESS than -5%
***Sector recommendations are defined based on market capitalisation weighted average expected total
return for stocks under our coverage.
This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not
make any representations as to its accuracy or completeness. Any recommendation contained in this document does not have regard to the
specific investment objectives, financial situation and the particular needs of any specific person who may read this document. This
document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees.
Kenanga Investment Bank Berhad accepts no liability whatsoever for any direct or consequential loss arising from any use of this document
or any solicitations of an offer to buy or sell any securities. Kenanga Investment Bank Berhad and its associates, their directors, and/or
employees may have positions in, and may effect transactions in securities mentioned herein from time to time in the open market or
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[email protected]PP7004/02/2013(031762) Page 5 of 5
