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Serbia Dinamik is looking for more money

A series of M&A transactions and an order backlog of RM 4 billion raise concern that could weigh on the company's financial figures. Datuk Mohd Abdul Karim, Chief Executive Officer, informs FocusM that the provider of consulting engineers intends to raise more money for these M&A transactions. Mr. Karim says the firm is seeking M&A transactions with large tech firms such as General Electric and Siemens to improve its offering and service.

It is an international service enterprise for the fields of energy production and petroleum. Serba Dinamik was informed in May that it had discussions with several European, US and Middle Eastern counterparties to complete M&A transactions, although no transaction had been previously disclosed at the date of publication.

Serba Dinamik's main reason for this is that it would significantly lower operating expenses by producing its own parts. RM300 million (76.9%) is planned for the development of the company's commercial and industrial equipment, with the proceeds to be used within 12 to 36 month after the company's flotation.

After the IPO, the first German acquisitions were the 40% interest in the Amanie Joint Venture (KAJV) consortium for RM 34 million. As a result of this takeover, Serba Dinamik received a RM289 value agreement for RM289 in the areas of civil and structural design, sourcing, building and start-up (EPCC). Serba Dinamik's current share of sales is 65% in Serba Dinamik's global operations, with the remainder going to German customers.

The Middle East alone accounts for more than half of our sales. Its most important driving forces are its key operating and service (O&M) and EPCC businesses, which are being expanded into globalization. On the basis of the current success story, around 80% of the agreements will be extended.

The O&M activities of Serba Dinamik are carried out by means of service, repairs and overhauls (MRO) for rotary instruments as well as by means of inspections, repairs and servicing (IRM) for stationary instruments. The company has an RM10 image tenders for the next three years, which is expected to be 70% for O&M orders and 30% for EPCC orders.

Serba Dinamik will receive long-term funding from its RM3 assets owner ship, a CNG facility for RM3, 8 million in Muaro Jambi, Indonesia, O&M from three small hydro power stations in Kota Marudu, Sabah and the EPCC Terengganu facility, according to a Public Investment Bank statement.

Bahrain also has EPCC capability for an integral facility for the disposal of solids and demineralisation of waters. Sales will increase due to the extension of operations in Malaysia and the UAE, the creation of an industry reserve in Sarawak and other M&A possibilities in connection with further generation project.

"Serba Dinamik is a leader in MRO with 23 years of experience, geographic diversification but particular strengths in the Middle East," says a Public IB survey. "The longterm agreements have terms of three to 22 years and support the Group's recurrent earnings features. The Serba Dinamik Middle East project remains the keys to the company's success.

For the fiscal years 2016-2019 (FY16-FY19) AllianceDBS Research predicts a 24-25% average year on year increase in sales/operating income (CAGR). "While total margin is likely to be lower in FY17, we anticipate a gradual increase in the Group's operational margin in FY18/FY19 due to the growing contributions of higher-margin Middle East contracts," AllianceDBS said.

AllianceDBS Serba Dinamik sees a good starting point for further orders in Sarawak, as more O&G, electricity production and infrastructural investment will flow into the state in the years to come. In Bintulu, Sarawak, the Group plans to design a Central Utilities Unit (CUF), while in Johor it plans to construct a new production site for EPCC work and IRM for the Petronas Refinery and Petrochemicals ( "Rapid") and other forthcoming Pengerang Integrated Petroleum Complex ( "PIPC") development work.

Serbia Dinamik is also a partner of the Jeddah, Saudi Arabia-based Islamic Development Bank (IDB) to secure its first order in Africa, which is being sought by Q4FY17. With 89 employees, the O&M Professional Division was the biggest source of sales in fiscal 16. The EPCC sector with R232 followed. Sales in Malaysia were primarily generated from the performance of O&M service for service agreements with Petronas Carigali Sdn Bhd, other Petronas Group petroleum and chemical groups and the EPCC order for the construction of small hydropower stations in Kota Marudu, Sabah, with One River Sdn Bhd.

With RM337, the Petroronas Group continues to make the biggest contribution to Serba Dinamik's sales in Germany. As a result, there were 6 million resulting from the performance of servicing activities for current agreements. Petrona's vendors Other key players were Sarawak Shell Bhd and One River Power Sdn Bhd, which owned RM67. Serbia Dinamik was established in 1993 by Abdul Karim as a rotary machinery supplier.

This was followed by other Middle Eastern markets (Saudi Arabia, Oman, Bahrain and the UAE). Following a conflict between Qatar and three Arabian confederates, the company's stock came under sales squeeze at the beginning of last months. Karim, however, had assured that the firm remains in Qatar as it is not affected by the rupture.

Serba Dinamik is preparing to assist Qatar's natural gas production after the withdrawal of its Arabian coalition partners. The O&M service of Serba Dinamik in Qatar accounted for 16% of the company's 16.