Serba may raise RM500mil-RM700mil to fund RM17bil of jobs

KUALA LUMPUR: Serba Dinamik Holdings Bhd may be required to fork out upfront working capital of between RM500 million and RM700 million to execute its order book, Kenanga Research said.

Serba Dinamik’s order book has swelled to RM17 billion following the latest US$1.78 billion (RM7.7 billion) construction contract in Abu Dhabi, its largest contract win todate.

“In order to maintain its net-gearing below 1.0x (currently at 0.8x), we believe a corporate exercise could be possible within the year.

“Most likely, the company could be seeking an additional 10 per cent placement, given that it still has shareholders’ mandate which could roughly raise about RM500 million,” Kenanga Research said in a report today.

The firm said the Abu Dhabi contract had displayed Serba Dinamik’s winning abilities and continued drive for growth.

It also showcased the company’s flexibility in not over-relying purely on oil and gas jobs, especially when the sector was facing a downturn.

Given the large contract size, Kenanga Research expects Serba Dinamik to sub-contract 20-30 per cent of the jobs in which it did not have expertise.

The portions will most likely include civil engineering and construction works.

Kenanga Research said the contract would provide four to five years’ of earnings visibility to Serba Dinamik.

“We expect this contract to fetch gross margins within the low-teens percentage,” it added.

The firm maintained its “outperform” call on Serba Dinamik, with an unchanged target price of RM3.05.

“We continue to like Serba as it has one of the best earnings growth delivery track records among its peers. Further contract wins and continued earnings delivery would act as catalysts moving forward,” it said.