$SERBADK / 5279 (SERBA DINAMIK HOLDINGS BERHAD) announced on 13th April that it acquired 24.84% stake of $SGX-544 CSE Global. Transaction price is at about SGD 0.45, or 15x PE and 1.3x PB.
Personally think that this is a good piece of business by Serba Dinamik as CSE Global have alot of upside potential (both profit & share price) and have synergies to offer, imo.
lets look at CSE GLobal... Investment highlights are numbered. Also attached CIMB's report on the co...
CSE Global is a global technology company offering integrated solutions for the oil & gas, mining, and infrastructure sectors. Oil & Gas Projects accounted >75% of revenues before oil prices collapsed in 2015. After that, the company has built up projects in infrastructure and mining.
FY17 net profit was probably one of the worst years for the company (recorded -SGD45.1m), hit by one-off settlement costs and other impairments resulting from the downturn in the O&G industry... 1) However higher energy prices of late have had positive intake in orders in 4Q17. Management's tone also sounded more optimistic.
"With current outlook of higher flow orders in greenfield and brownfield orders, the Group expects a much better performance in FY 2018"
The company is also known for maintaining and upgrading the software systems for Singapore's ERP. 2) As the Singapore government moves towards the next-generation ERP system by 2020, CSE indirectly is likely to continue getting projects.
3) The company has been paying dividends despite the challenging environment. If the company continues to keep a steady DPS/share of SGD 2.75 cents (past 3 years), the dividend yield is 6.7%.
4) Untapped potential that could arise from a more optimal financial management from the board and top management of the company. On this, please read more from Quarz Capital letter here: http://bit.ly/2Hp84ET
Synergies:
According to SDH, the acquisition is part of its overall strategy to i) expand its
geographical footprint in the US, Mexico, Australia and New Zealand, ii) offer EPCC and O&M to CSE’s O&G client base, iii) strengthen its information technology (IT) segment by potentially integrating CSE’s various IT solution platforms, and iv) leverage CSE’s knowhow in incinerator technology for the environmental industry and, thus, strengthen the SDHB group’s capabilities in its sewerage treatment plan projects.
Summary:
This is probably a bigger deal for CSE Global and potentially a catalyst to re-rate the stock to a very investable trade idea. However, it also shines good light to Serba Dinamik and its management's strategy and foresight to close this acquisition. Liking Serba Dinamik more and more. Afterall, it's one of the few oil n gas company in Malaysia with foreign exposure.