KUALA LUMPUR :  Serba Dinamik is planning to raise a sukuk issuance worth US$200mil to US$250mil (RM826mil to RM1bil) for a tenure of three years to refinance its existing foreign loans and international projects.

Amlnvestment Research is maintaining its buy call with unchanged forecasts and sum-of-parts-based (SOP) fair value of RM6.50 a share, which implies an FY19F PE of 20 times or 33% below Dialog’s 30 times, the company’s closest peer in Malaysia.

It saud in Wednesday Serba Dinamik’s foreign debt accounts for 40% of gross debt of RM1.7bil as at Dec 31, 2018, of which RM496mil (US$120mil) is scheduled to be repaid this year.

”Hence, the group is earmarking US$80mil to US$130mil for engineering , procurement and construction projects in Laos, Tanzania and Uzbekhistan, as well as working capital for Middle Eastern operation and maintenance contracts.

”While in group has already issued a RM800mil sukuk programme on October last year and retaiend the outstanding proceeds of RM419mil from RM407mil IPO in February 2017 and RM427mil private placement in January 2018, this new foreign-denominated debt issue circumvents the conversion of the ringgit, which requires Bank Negara approval,” it said.

S&P Global Ratings has assigned a preliminary ”BB-” rating for long-term issuer credit and guarantees. Fitch Ratings has accorded a long-term issuer default rating of ”BB-” with a stable outlook.

These could mean an interest rate of 5.5% , higher than Serba’s average gross interest rate of 5.1% in  FY18.

”We are neutral on this development, which is part of the group’s financing programme for international expansion.

”While net gearing has risen to 0.45 times as at 4QFY18 from 0.29x in 4QFY17 due to the pipeline of multiple projects, managementreaffirms that Serba Dinamik does not require any equity-raising exercise.

”Management expects the continuation of strong revenue growth this year driven by growing demand in the Middle Easr and Southeast Asia, spearheaded by the UAE and Qatar,” Amlnvest Research said.

Most of the growth will be underpinned by Serba Dinamik’s operation and maintenance services, which account for 89% of the group’s FY18 revenues.

Serba Dinamik is currently trading at a grossly undervalued FY19F PE of 12 times versus over 30 times for Dialog Group.

”We remain positive on Serba Dinamik’s O&M business model, which expanding its long-term recurring earnings profile by strategically leveraging its EPCC and asset ownership platform,” it said.

[Source: “Serba Dinamik to raise up to RM1b, Amlnvest Research retains buy” published by TheStar.com.my / Star Media Group Berhad]

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