30 September 2021

Results Review: 6QFY21

HLIB Research
PP 9484/12/2012 (031413) Serba Dinamik Holdings
Jeremie Yap
jeremieyjh@hlib.hongleong.com.my Worst-ever quarterly performance
(603) 2083 1729
Serba reported its worst-ever quarterly core net profit of RM14.9m (-87% QoQ, -
90% YoY) in 6QFY21. Cumulatively, 18MFY21’s core net profit of RM722m
SELL (Maintain) missed our full-year forecasts by 10%. Pending the outcome of the Special
Independent Review (SIR) report from EY, which is expected to be released next
Target Price: RM0.240
month, we recommend investors to shy away from Serba for the time being, at
Previously: RM0.280
least until all the audit issues have been clarified. Hence, we maintain SELL on
Current Price: RM0.335
Serba with a lower TP of RM0.24 (from RM0.28 previously) based on 0.2x FY22F
(from 0.3x FY21) BVPS. We continue to assume that no dividends will be paid
Capital upside -28.4%
Dividend yield 0.0% out in FY22-23.
Expected total return -28.4%
Below expectations. Serba’s 6QFY21 core net profit of RM14.9m (-87% QoQ, -90%
Sector coverage: Oil & Gas YoY) and 18MFY21’s sum of RM722m missed our full-year forecasts by 10%.
Company description: Serba provides Consensus estimates are not meaningful due to the distortion arising from the change
engineering solutions. The company offers in financial year-end from December to June. We derive 18MFY21 core net profit after
operation and maintenance, system integration, adjusting for a RM17.7m of forex gain and a one-off gain of RM20m from its
training, civil works, planning, procurement, repurchase of its Sukuk programme.
construction, and commissioning services
Dividend. None declared, as expected. 18MFY21 dividends totalled up to
Share price 5.45sen/share. In June 2021, both Fitch Ratings and S&P Global Ratings have
RM Pts downgraded Serba Dinamik’s rating – mainly to reflect its elevated refinancing risk for
sdh (LHS) KLCI (RHS)
3.0 1800
its US$222mil sukuk, which is due May 2022. With that, we will be taking a
1700 conservative stance by assuming no dividend payouts for FY22-23 as we strongly
2.0 1600 believe the group will need to preserve cash for working capital and managing its
1500
short-term debt maturities. The group’s net debt and gearing stood at RM3.4bil and
0.89x as at end-June 2021 (vs. a net debt and gearing of RM2.3bil and 0.76x as at
1.0 1400
end-June 2020).
1300

0.0 1200 QoQ. Core profit was down -87% due to weaker performances from all of its business
Jan-00 Dec-20 Feb-21 Apr-21 Jul-21 Sep-21
divisions, peculiarly its O&M segment. Regionally, we note lower revenue
Historical return (%) 1M 3M 12M contributions from Malaysia (-6%), Saudi Arabia (-67%) and Bahrain (-90%).
Absolute 253.5 375.0 -8.4
Relative -19.8 4.9 -80.4 YoY. Core profit was down -90%, attributed to lower profit contributions from all of its
business divisions.
Stock information
Bloomberg ticker SDH MK Outlook. Pending the outcome of the Special Independent Review (SIR) report from
Bursa code 5279
Issued shares (m) 3,710
Ernst and Young (EY), which is expected to be released in October 2021, we
Market capitalisation (RM m) 1,243 advocate investors to shy away from Serba for the time being, at least until all the
3-mth average volume (‘000) 200,475 audit issues have been clarified. We are also wary that there has been a significant
SC Shariah compliant Yes reduction of investor engagement after the revelation of recent events. Even if the
F4GBM Index member No verdict of the SIR is to be in favour of Serba Dinamik, we reckon that its share price
ESG rating  may not return to its previous levels as institutional investors would factor in higher
risk assessments due to corporate governance, be it perceived or otherwise.
Major shareholders
Dato’ Karim Abdullah 27.1% Forecast. We reduce our FY22-23 forecasts by 34% for both forward years under
Sahib Abdul Kadir 16.3%
EPF 7.6% review as we trim our orderbook replenishment assumptions to RM3.5bil and
RM6.3bil respectively (from RM9.6bil and RM7.8bil previously).
Earnings summary
FYE (June) FY21^ FY22f FY23f Maintain SELL with TP of RM0.24 based on 0.2x FY22 BVPS. We maintain our
PATMI - core (RM m) 722.3 533.7 558.3 SELL recommendation with a TP of RM0.24 (from RM0.28 previously) based on 0.2x
EPS - core (sen) 19.4 14.3 15.0 FY22F (from 0.3x FY21) BVPS.
P/E (x) 1.7 2.3 2.2
^FYE December

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Serba Dinamik Holdings l Results Review: 6QFY21
Figure #1 Quarterly results comparison

Figure #2 Financials
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Serba Dinamik Holdings l Results Review: 6QFY21

FYE Dec (RM m) FY18 FY19 18MFY21 FY22f FY23f

Revenue 3,283.2 4,528.6 8,606.2 7,215.0 7,733.0
EBITDA 563.3 858.2 1,372.4 1,143.4 1,260.1
EBIT 473.3 691.0 1,172.3 902.0 976.8
PBT 437.6 544.8 848.4 589.1 617.9
PAT 392.8 498.0 758.4 536.0 560.9
PATMI – Core 391.5 496.6 722.3 533.7 558.3
PATMI – Reported 391.5 496.6 760.0 533.7 558.3
% change YoY – Core PATMI 126.3% 26.9% 45.4% -26.1% 4.6%
Core EPS (sen) 26.7 14.7 19.4 14.3 15.0
P/E (x) 13.7 2.3 1.7 2.3 2.2
EV/EBITDA (x) 11.2 3.7 2.9 2.4 2.1
DPS (sen) 7.3 4.2 5.5 - -
Yield (%) 2.0 12.5 16.4 - -
Shareholder's Equity 2,092 2,440 3,406 4,455 5,013

BVPS (RM/share) 1.4 0.7 0.9 1.2 1.3

P/B (x) 2.6 0.5 0.4 0.3 0.2

ROE (%) 26.7 14.7 20.4 14.3 15.0
Net Gearing (%) 28.6 45.5 83.6 80.5 33.2

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Stock rating definitions

BUY Expected absolute return of +10% or more over the next 12-months.
HOLD Expected absolute return of -10% to +15% over the next 12-months.
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Sector rating definitions

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NEUTRAL Sector expected to perform in-line with the market over the next -12 months.
UNDERWEIGHT Sector expected to underperform the market over the next -12 months.

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