Good Morning everybody,

It has been a while. I am Philip, and so far I would like to introduce to you my long term growth story stock for the year that I have picked up. This was not an easy decision to make, as I have had many doubts about the accounts of these companies through the years, and going through company information I was very relunctant to buy the company despite the many good results, and even after buying, I have refrained from writing my investment analysis (although many analysts in my telegram group have asked me my reasons for buying), as I was still unsure of the viability of investing in Serba dinamik. However, the recent analyst presentation had a few analysts friends bringing up questions which cleared up my doubts.

First lets set the stage:

My buying costs for Kpower,SCIB and Serba.

I started my position in Serbadk during the March crisis, pulling the trigger on a 20th Feb at RM2.34, and averaging down to RM1.12 on 23rd March 2020, for an average cost of RM1.38. This was followed up by SCIB on 15th June 2020 at an average cost of RM2.07, and KPOWER on 17th June 2020 at an average cost of RM2.03.

Now, the question is why did I buy?

In quantitative terms, it seemed like a good risk to take, on a regular quarterly basis serba gives out dividends like clockwork. at 1.5 cent per quarter average, a 6 cents dividend at cost basis of 1.12 is a healthy 5.3% dividend yield. Very good numbers for a growth company. Even if oil and gas dropped to -37USD per barrel, and the world seemed like ending in March.

However, as many know, I am a qualitative investor. The main 3 questions to ask as a qualitative investor for oil and gas related companies is:

1. WILL IT GO BANKRUPT? IS SERBA DINAMIK COOKING ITS BOOKS?

2. WILL IT LOSE MONEY? WHY IS SERBA DINAMIK REVENUE GROWING ALONG WITH LATE PAYING RECEIVABLES 

3. WILL IT GROW? WHY IS SERBA DINAMIK TAKING ASSET SHARING MODEL? IS IT A SCAM?

So, I went to thinking and came up with a few mental models.

1. Serba Dinamik will be in an industry where the numbers will be closely monitored due to Malaysia's connection to Middle east (jho low), figures and lending will be tight due to the massive losses in the industry. So any company trying to raise capital during this trying time is going to find it very very hard to do. right? WRONG.

So who is investing heavily in Serba Dinamik, and what did they see?

Local and Foreign Instituional Investors from Middle East?

Let's start here.

Note the Date. It will be useful later.

Who is this distinguished gentleman? It is non other than...

HE. Eng. Salah Salem Omair Al Shamsi, Abu Dhabi

a member of the royal family of Abu Dhabi. The owner of Liwa investment holdings, a former director of ADNOC, (https://en.wikipedia.org/wiki/Abu_Dhabi_National_Oil_Company) , and interestingly enough, also a very capable professional engineer with deep connections. One interesting thing to learn, both Karim and HE Salem, both are IR (Ingenieur), professionals and leading billion dollar technical companies which are very complex (and not sales, marketing and trading related). 

Very important point, especially to an engineer like myself. 

So, having taken notice of this visit, I asked myself a few questions, why would his excellency want to visit Malaysia and Karim? What is so special about Serba Dinamik? Taking the opportunity, I went to visit these 2 places:

BIEH in bintulu and PeiP in Pangerang. While in stages of construction, I received a lot of interesting information on what is going on and his overall picture of what Serba Dinamik is trying to do (successfully).

You see, how do you increase operations and management? Your bottleneck is the number of well trained staff who can handle jobs independently and reaching a satisfactory quality level in the shortest amount of time with acceptable skills. Usually for O&M jobs it is very expensive because of all the swiss and german technicians with high pay due to experience who charge 10-15K USD a day to visit and troubleshoot  and do maintenance. 

How do you solve that? Karim found an answer.

He bought tech companies to do AR (augment reality) training for maintenance, bought a school and training center, bought manufacturing and supply chain and fabrication facilities so he can provide a one stop, job winning center with new support team being trained on a daily basis to get all those skilled labour operations and mainteanance jobs that are sorely required around the world.

Sounds impressive? Not yet, because he went one step further.

Instead of building those fabrication yards and equipment repair facilities in China or USA or Germany etc where the skilled labour is, he decided to take the plunge and build those facilities right at the doorstep of the customers who need it, and train the labour locally. Inversion of a business model. If you think about it, the cost difference between sending out broken turbines and entire machinery out for parts back in USA, if you can repair the parts themselves and fabricate spare parts right next door, wouldn't it be cheaper? Definitely. This builds a roadmap of future monopoly where instead of sending things to the nearest service center which is Singpore fabricators, how about just a 20 minute drive away from pangerang?

And if you noticed Serbadk buying something worth 530 million from a client for 320 million and securing more long term projects from Petronas? Its just smart business.

THE PRESENT.

Recently there was a corporate presentation to analysts. It can be found here.

https://www.bigmarker.com/Esente_Communications/Serba-Dinamik-Holdings-Berhad-2Q20-Investor-Briefing-for-equity-investor3-2020-08-26-02-00-pm?bmid=ccd657609e1b 

This webinar and soundbyte is a very interesting sharing, in which one line was very clear. The key to whether Serba Dinamik is going to float or drown is due to this years awarded EPCC project. Remember the chairman of Liwa Investment Holdings?

Make no mistake, both of these major projects are abu dhabi projects brainchild under HE Salem. All we are waiting now, is for the full plan and design to be submitted, and a to be released announcement by Abu Dhabi governemnt that it will take a share in this project, for it to become very "strategic" and major institutions in middle east will start taking a good long look. From the webinar corporate presentation, this announcement is coming up very soon and will clear my biggest worry, WHO IS PAYING FOR THESE EPCC PROJECT? I believe that with their track record of project completion and corporate relationship, they will do well.

THE FUTURE

Well, where are we currently right now is in a very interesting space. With 10+ quarters of revenue increases  growth, a new business unit which jump from 20 million to 120 million in revenue in a few quarters ( tech bought from india in AR and programming arm), one would expect things to move forward and a good return on investment right? (judging from the meteoric revenue and earnings rise of kpower and SCIB recently)

Sadly, a co founder and second largest shareholder no longer shares the same view, and is dumping his shares on a quick and deep basis as much as he can to achieve his other goals in life. I find no fault in that, as it allows me to buy shares at a cheap price, while waiting for the execution of the projects and collect dividends every quarter. He has decided to invest in istone, and multiple other companies in bursa, telling us that he is planning to forge his own path in company ownership rather than leaving the boat due to internal problems with serba dinamik. I wish Awang all the best, and hope he succeeds well.

In any case Serba Dinamik is a very unique company. It pays dividends every quarter, is growing revenue lights out, has a good debt to equity ratio, and is a malaysian company with exposure the world over (it even bought a  tiny profitable scottish company that deals in the north sea, while keeping the owner as CEO). It is making all the right moves, and has good reputation among its clients. Sadly, in a world of black lives matter, the "color" of the company matters just as much as how the company is performing. If Serba Dinamik was a chinese run company with international staff, the valuation would be sky high I'm sure. However, tainted with the malay bumiputera company mark, the bonds are selling at a record low, the bankers and analysts are saying books are cooked and investments are fake, and the low share price is used as a reason to prove that the company is a bad one.

Ask yourself one question, if someone gave you the financial report for the last 5 years since IPO without company details, what would you think of the company?

I won't be complaining as it allows me to buy at a cheap price over time, however, sometimes I feel companies that have performed for the last 25 years has earned a right to get a little more rope to hang themselves in, if it so. They should be compared, measured and judged for the actions they are doing and company performance, rather than the perceived reasonings behind it. I found myself also under the same bias for the longest while, thinking that just because the share price is low that the company must be bad. Luckily, even old dogs can learn new tricks (or hang themselves in it).

I will be updating this page as more questions come in. 

Hope you learned something new.

Happy Merdeka 2020 everyone.

PS. one last note: I called old friends at the major hardware stores teck guan, kozai, choobee in Sabah. For their Kota Marudu project, the construction materials? All in cash, lowest price possible delivery. A cooked book company? I think not.

P.P.S. As I am unable to share the analyst corporate presentation (only the webinar soundbyte), if you are interested for more information on the presentation I am more than happy to share it with you on my telegram group.