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For the Higher Quality version of our Annual Report, kindly visit our

corporate website at www.serbadinamik.com

http://www.serbadinamik.com/

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SERBA DINAMIK HOLDINGS BERHAD 33

Became aPETRONAS vendor.First overseas MRO contract

for an LNG Plant in Qatar.

2007 2013

20152017

2018

2005 2004 2001 1997 1993Established first service centre in Bintulu, Sarawak providing MRO services for rotating equipment.

Established offices in London and Bahrain to service customers in the United Kingdom and the Middle East.

Graduated from PETRONAS Vendor Development Programme (VDP).

Set up base in Indonesia to address O&G opportunities in Indonesia.

Set up our second service centre including training centre in Paka, Terengganu.

• Acquired a Compressed Natural Gas (CNG) plant in Muaro Jambi, Indonesia.• Appointed by MITI to be anchor company for our own VDP. • Acquired 30% stake in a company with combined 29MW small hydropower plants in Kota Marudu, Sabah.

• Listed on the Main Market of Bursa Securities.• Commenced development of our Bintulu Integrated Energy Hub in Kidurong, Bintulu.• Acquired a 16-storey office building in Shah Alam as our new head office.• Expanded into the African continent for the development and operation of a chlor-alkali plant in Tanzania.

• Signed MoA for the aquisition of 40% stake to three companies with combined 60MW small hydropower plants in Perak.• Commenced development of Pengerang eco-Industrial Park (PeIP) and Pengerang International Commercial Centre (PICC) in southern Johor.

Incredible JourneyOur

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MRO of rotating equipment

IRM of staticequipment and structure

Construction & Commissioning

Engineering, Procurement

Opera

tion & Maintenance

O&M

EPCC OTHERS

Other product

s &

Serv

ices

International Energy Services GroupProviding Engineering Solutions

Industries Served

Upstream O&G:Production Platforms

Downstream O&G:Oil Refineries

Downstream O&G:LNG Plants

Downstream O&G:Petrochemical Plants

Power Generation Water & Utilities

MODELOur BUSINESS

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Process equipment is used in many manufacturing and processing plants like crude oil refineries, gas processing plant, petrochemical manufacturing plants, palm oil refineries, power generation plants and distillation plants.

For FYE2017, our O&M were focused on maintenance, repair and overhaul (MRO) of rotating equipment, and inspection, repair and maintenance (IRM) of static equipment and structures.

MRO of Rotating Equipment

Our Operations and Maintenance Services

We are an international energy services group providing engineering solutions where our main business activities comprise operations and maintenance (O&M) services, and engineering, procurement, construction and commissioning (EPCC) works. A small proportion of our business is in related products and services.

Rotating equipment is a general classification of machinery and equipment designed to generate reciprocating or circular motion, which is then used to do work. Examples of rotating equipment include gas and steam turbines, internal combustion engines, electric motors, generators, compressors, pumps, blowers and fans.

Rotating equipment is used in many industries including oil and gas, power generation, manufacturing, processing, mining, marine, transportation and construction. Rotating equipment is also used in commercial applications, including for heating, ventilation and air-conditioning, escalators and elevators.

We are an independent service provider, and therefore we are not restricted in providing MRO services for any specific brand of equipment.

IRM of Static Equipment and Structures

Static equipment refers to objects that are part of a processing or manufacturing process that do not have any mechanical or moving parts. They include process equipment like boilers, pressure vessels, heat exchangers, columns, separators and reactors, and other equipment and structures like storage tanks and silos, piping systems and support structures.

BUSINESS ACTIVITIESOVERVIEW

Operations

Operations refers to in the efficient, effective and safe running of a plant or facility. We currently operate a compressed natural gas (CNG) plant. Some of the operations contracts we have entered recently include small hydropower plants, chlor-alkali plants, raw water processing and sewerage treatment plants, and gas terminal facilities.

Engineering, Procurement, Construction and Commissioning

EPCC is a general term referring to the responsibility to deliver an entire defined project. We carry out EPCC of plants, facilities, road infrastructure and buildings, including small hydropower plants, CNG plants, water treatment plant, microturbine generators, steel structures, piping system and firefighting system. We recently entered into agreements to carry out EPCC for raw water processing plant, sewerage treatment plants and Government building.

Other products and services

We also provide process control and instrumentation, technical training, ICT solutions and services, supply of products and parts, as well as provision of logistics services.

ourof

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United Kingdom

London

Manama

RasZuwayed

Cornwall

Bahrain/United Arab Emirates

RasAl-Khaimah

FACILITIESGLOBAL PRESENCE

CNG

Our&

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O U R G L O B A L P R E S E N C E & FA C I L I T I E S

Malaysia Indonesia

Paka

BandarPenawar

BintuluMiri

LabuanRiau

MuaroJambi

Jakarta

AmbonIsland

PasirGudang

Klang

ShahAlam

CNG

GLOBAL PRESENCE

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As an international company, a substantial proportion of our business is derived from foreign countries.

We have a diversified customer base covering Asia, Middle East, Africa and United Kingdom.

Revenue contribution for FYE2017. Our entry into Tanzania in Africa was in early 2018. As such no revenue was recorded in FYE2017.

Europe0.16%

MiddleEast

59.04%Central &

South Asia5.16%

SoutheastAsia

35.64%

& CUSTOMERSMARKETS

Our

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Asia Entrepreneur Award 2018

Serba Dinamik Group Berhad – Global Top Brand ‘Excellence’ Award 2017-2018

The Bizz Award 2017

In recognition of “Inspirational Company” for Serba Dinamik Sdn Bhd and “The World Business Leader Award US, St. Thomas” for

Serba Dinamik Group Berhad

MVCA Awards Night 2017

In recognition of “Outstanding Investee of 2016”

& RECOGNITIONSAWARDS

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MANAGEMENT

ANALYSISDISCUSSION

42 Financial Highlights

43 Financial Performance

&

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1000

0

2000

3000 536.20 755.77 1,402.94 2,168.33 2,722.32

RM M

illio

n

Revenue2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

100

0

200

300

350

250

150

50

159.5767.69 267.93 346.0765.82

RM M

illio

n

Profit Before Tax

RM million

Revenue Gross Profit Net Profit

304.

79483.

932,77

2.32

Cumulative Annual Revenue Growth Rate Cumulative Annual PBT Growth Rate

The figures and values for FYE2013-FYE2016 in this section represent the performance of Serba Dinamik Group Berhad in order to reflect the performance of the group prior to the incorporation of Serba Dinamik Holdings Berhad and the subsequent acquisition of Serba Dinamik Group Berhad and its subsidiaries on 26 May 2016. For further information, please refer to our Initial Public Offering prospectus available on our corporate website.

51 43%50 11%

17 78%

11 20%Gross Prof i t Margin

Ne t P r o f i t Ma r g i n

HighlightsFINANCIAL

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5-YEAR GROUP FINANCIAL SUMMARY

Financial Year Ended 31 DecemberRM'000 2013 2014 2015 2016 2017Revenue 536,195 755,768 1,402,942 2,168,328 2,722,318 Cost of operations (444,881) (644,461) (1,170,483) (1,794,611) (2,238,385)Gross profit 91,314 111,307 232,459 373,717 483,933 Other operating income 1,757 8,151 852 1,073 4,074 Administrative and other operating expenses (23,669) (33,645) (51,201) (71,845) (105,908)Results from operating activities 69,402 85,813 182,110 302,945 382,099 Other non-operating income - - 2,590 - - Finance income 10,198 846 2,040 3,963 3,135 Finance costs (13,550) (18,974) (27,169) (38,974) (37,071)Net finance costs (3,352) (18,128) (25,129) (35,011) (33,936)Share of results of equity accountedassociates (232) - - - (2,092)PBT 65,818 67,685 159,571 267,934 346,071 Tax expense (4,199) (312) (3,009) (22,125) (41,279)PAT 61,619 67,373 156,562 245,809 304,792 Other comprehensive income, net of tax Items that will not be reclassifiedsubsequently to profit or loss Remeasurement of employee benefits 38 18 - - - Items that may be reclassifiedsubsequently to profit or loss Foreign currency translation differencesfor foreign operations (287) 5,816 41,795 35,412 (61,180)Total comprehensive income for the year 61,370 73,207 198,357 281,221 243,612 PAT attributable to: - Owners of the Company 58,676 63,881 156,723 246,124 308,087 - Non-controlling interests 2,943 3,492 (161) (315) (3,295)PAT 61,619 67,373 156,562 245,809 304,792 Total comprehensive incomeattributable to: - Owners of the Company 58,427 69,715 198,319 280,596 247,664 - Non-controlling interests 2,943 3,492 38 625 (4,052)Total comprehensive income for the year 61,370 73,207 198,357 281,221 243,612

PerformanceFINANCIAL

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5-Year Performance Review

The Group's gross profits also experienced constant growth from RM91.31 million in FYE2013 to RM483.93 million in FYE2017 showing a CAGR of 51.73%. The overall growth was attributable mainly to revenue growth in all business segments as well as improved efficiency evident by the gross profit margin improvement from 17.03% in FYE2013 to 17.78% in FYE2017.

Profit after tax grew from RM61.62 million in FYE2013 to RM 304.79 in FYE2017. The growth showed a CAGR of 49.13% over the five year period which is in tandem with our recorded growth in revenue and gross profit for the year.

F I N A N C I A L P E R F O R M A N C E

Our group revenue constantly grew from RM536.20 million in FYE2013 to RM2.72 billion in FYE2017 showing a Cumulative Annual Growth Rate ("CAGR") of 50.11%. The growth in revenue was due to additional secured contracts both locally and overseas. During FYE2017, we secured 34 additional contracts with an estimated value of approximately RM2.8 billion. As at the date of this report, our orderbook value stands at approximately RM6.0 billion with an average contract duration of 3-5 years. These contracts are mostly acquired through the normal tender and bidding processes as well as contracts awarded as a part of bigger deals under our asset ownership business model.

232.46111.31 373.72 483.9391.31

100

0

300

500

RM M

illio

n

Gross Profit

200

400

2013 2014 2015 2016 2017

61.62 67.37 156.56 245.81 304.79

RM M

illio

n

Profit After Tax2013 2014 2015 2016 2017

100

0

200

350

300

50

150

250

1000

0

2000

3000536.20 755.77 1,402.94 2,168.33 2,722.32

RM M

illio

n

Revenue2013 2014 2015 2016 2017

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Serba Dinamik Holdings Berhad and its subsidiaries is an energy engineering group providing engineering solutions primarily to the oil & gas sector, power generation industries, and utilities sector in eleven (11) countries across five (5) different regions namely, South East Asia, Central and South Asia, Middle East and Europe. Our business activities include the provision of operation & maintenance (“O&M”) services, engineering, procurement, construction and commissioning (“EPCC”) works, and other supporting products and services, which include technical training, provision of Information & Communication Technology (“ICT”) solutions and services, supply of products and parts, and provision of logistics services. We provide our products and services to engineering companies and contractors, O&G operators, gas processing plants, oil refineries, petrochemical manufacturers, independent power producers and utilities and water treatment plants among others. We are also integrating the Asset Ownership Model into our operations as a natural growth step forward. Under the Asset ownership model, we acquire minority equity stakes in companies within our scope of expertise to secure long-term income from the EPCC of the projects, the long-term O&M service provision to these assets as well as income streams from the equity stake held by the group.

Our Operations

The Group's segmental revenue composition for FYE2017 remains similar to FYE2016 with the O&M segment being the main contributor for revenue during both years. The O&M segment generated RM2.34 billion revenue during FYE2017 showing an increase of 21.35% as compared to RM1.93 billion during FYE2016. Overall, the segment accounted for 86.05% of the total group revenue in FYE2017 as compared to 89.03% in FYE2016.

The EPCC segment ranked second in contribution with a recorded revenue of RM374.27 million in FYE2017 as compared to RM233.64 million in FYE2016 showing a growth of 60.88% year on year. This growth effectively increased its contribution to the total revenue to 13.75% in FYE2017 from 10.73% in FYE2016.

Other supporting products and services accounted for 0.20% of the total revenue or RM5.35 million during FYE2017 as compared to RM5.16 million in FYE2016.


O&M EPCC Others

FYE2017

RM 2,342.70 million

RM 374.27 million

RM 5.35 million

86.05%

13.75%0.20%

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1. Operation & Maintenance

The O&M segment's revenue grew by 21.35% to RM2.34 billion in FYE2017 as compared to RM1.93 billion in FYE2016. Of the total revenue generated by the segment, 80.57% was derived from services provided to the Oil & Gas Sector and the remaining 19.43% was derived from services provided to the petrochemicals and power generation industries. The gross profit realised from the O&M segment stood at RM419.61 million reflecting a gross profit margin of 17.91%.

Within the O&M segment, the MRO of rotating equipment sub-segment remained the main contributor with a total contribution of RM2.18 billion or 93.03% of the O&M revenue. Under MRO, approximately 71.27% of the revenue was derived from our contracts overseas while the remaining 28.73% was generated from our local clients.

IRM of static equipment generated RM163.31 million or 6.97% of the revenue recorded for the O&M segment. This revenue was mostly generated from our contracts in UAE and Turkmenistan which collectively generated 66.38% of the revenue for this sub-segment.


2. Engineering, Procurement, Construction & Commissioning (EPCC)

The EPCC segment is the second largest revenue contributor to the group revenue making up 13.75% of the total revenue. During FYE2017, the EPCC segment grew by 60.88% year on year as compared to FYE2016 as a result of an increase in the number of projects in hand. The largest contribution to the segment's revenue came from our EPCC contracts in the Middle East followed by the construction of hydro power plants in Kota Marudu Sabah and our 28 MLD power treatment plant in Terengganu. Overall, the segment generated a gross profit of RM63.04 million with a gross profit margin of 16.84%.

1000

0

2000

2500

1500

500

2013 2014 2015 2016 2017

RM M

illio

n

17.71%

418.10 599.68

1,274.91

1,930.542,342.7016.20% 16.63% 17.29%17.91%

Revenue Gross Profit Margin


100

0

300

400

200

2013 2014 2015 2016 2017

RM M

illio

n

106.63 90.69124.94

232.64374.27

16.71% 16.84%

10.65%

15.59% 15.93%


10

0

30

40

20

2013 2014 2015 2016 2017

RM M

illio

n

11.47

65.40

3.09 5.16 5.35

21.73% 23.91%

50

60

7017.42%

6.87%5.59%

MRO IRM

RM2,179.39 million RM163.31 million

6.97%

93.03%

3. Other Product & Services

Other products and services achieved a modest growth of 3.7% from RM5.16 million in FYE2016 to RM5.35 million in FYE2017. ICT services accounted for 46.08% of the revenue for the segment while the remaining was attributed to technical education and training services and individual purchase orders. The gross profit for other products and services was RM1.28 million and the gross profit margin for the segment was 23.9%.

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4. Asset Ownership

Serba Dinamik recently adopted the asset ownership model as a strategic evolution to its current business operations. The business ownership model leverages on our expertise in the services relevant to the life- cycle of an industrial asset. Based on our ability to engineer, construct, maintain and operate assets as per the business segments mentioned above, Serba Dinamik is taking a step forward by acquiring minority equity stakes in several projects within our current and target niche industries. These acquisitions enable the company to benefit from several revenue streams across the life of the asset.

Geographic Segmentation

Serba Dinamik operates in eleven (11) countries across five (5) regions being South East Asia, the Middle East, South Asia, Central Asia and Europe. For FYE2017, 68.08% of our revenue was generated overseas with the Middle East region accounting for 59.04% of the group's total revenue, followed by Southeast Asia which contributed 35.64% of the Group's revenue. Central and South Asia collectively contributed 5.16% of the revenue while Europe accounted for 0.16% of the total Revenue.

South East Asia

South East Asia remained our second largest revenue contributor as it generated 35.64% of the group's revenue. Within South East Asia, we operate in Malaysia and Indonesia. The revenue generated in Malaysia grew by 12.83% from RM770.29 in FYE2016 to RM869.09 in FYE2017 making it the largest revenue contributor in FYE2017 with a total contribution of 31.92% of the Group's total revenue.

This increase is mainly attributed to growth in demand for O&M services locally as well as the growth in EPCC revenue generated from our Hydro power plants in Kota Marudu and the EPCC of the 28 MLD water treatment plant in Terengganu.

In Indonesia, the revenue recognised for FYE2017 was RM101.07 million, down 43.44% from RM178.70 million in FYE2016. The decline is mainly attributed to the completion of several projects in hand and less projects secured in Indonesia during the year as we are exploring more business opportunities in the country.


Malaysia

2013 2014 2015 2016 2017

295.94 350.83 486.02 770.29 869.09

1000

300400

200RM M

illio

n 500600700800900

2013 2014 2015 2016 2017

51.31 39.35 84.40 178.70 101.07

Indonesia

0

200

100

300

400

500

RM M

illio

n

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Middle East

The Middle East region is our largest contributing region making up 59.04% of the group's revenue. We operate in six (6) countries within the Middle East being Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates ("UAE").

Within the Middle East, revenue generated from Qatar in FYE2017 was recorded at RM491.37 million, up 40.87% from RM348.81 million in FYE2016 despite regional tensions in the area. Our operations in Qatar have remained unaffected as the Oil & Gas sector in the country is expected to remain stable regardless of the political tensions.

Revenue generated in UAE grew by 35.67% from RM213.50 million in FYE2016 to RM289.66 million in FYE2017. This revenue was mostly generated from our EPCC contracts with Lata International Services Ltd which provides its services to local end user clients in the oil & gas sector.

Revenue from the Kingdom of Bahrain grew by 107.93% from RM164.10 million in FYE2016 to RM341.21 million making it the second largest revenue contributor in the region. The growth in Bahrain was mainly a result of increased O&M work orders received during the year.

Revenue in Oman grew back to RM118.39 million in FYE2017 after a relative slow down in FYE2016 making a growth of 198.06%. The growth in revenue is mainly a result of increased work orders received during that year from our clients which ultimately serve the petroleum industry in the country.

Revenue generated in Saudi Arabia grew by 8.57% from RM279.70 million in FYE2016 to RM303.67 million in FYE2017 due to an increase of work orders received during the year.

In Kuwait, our revenue dropped by 7.48% from RM68.04 million in FYE2016 to RM62.95 million in FYE2017.


2013 2014 2015 2016 2017

4.94 9.85 5.63 164.10 341.21

RM M

illio

n

Bahrain

500

150

200

100

250

300

350

500

150

200

100

250

300

350

UAE

2013 2014 2015 2016 2017

1.00 38.69 196.36 213.50 289.66

RM M

illio

n

0

200

100

300

400

500

Qatar

2013 2014 2015 2016 2017

64.77 91.57 254.72 348.81 491.37

RM M

illio

n

0

200

100

300

400

500

Oman

2013 2014 2015 2016 2017

7.18 78.33 177.79 39.72 118.38

RM M

illio

n

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Central & South Asia

Our Revenue in Central & South Asia grew by 40.42% as a result of newly secured contracts in Turkmenistan. Turkmenistan was our largest contributor in the region for FYE2017 making up 5.16% of the total group revenue. Its revenue grew in FYE2017 to RM139.92 million from RM102.76 million in FYE2016 showing an increase of 36.16% year on year. This growth is attributed to newly secured contracts in FYE2017. India generated a revenue of RM0.50 million during FYE2017 from minor services jobs in the country.


0

200

100

300

400

500

KSA

2013 2014 2015 2016 2017

26.92 12.29 15.96 279.70 303.67

RM M

illio

n

166.40123.69 102.76 139.9280.95

100

0

200

RM M

illio

n

Turkmenistan2013 2014 2015 2016 2017

0.63 00.77 0.503.20

0

1

2

3

4

RM M

illio

n

India2013 2014 2015 2016 2017

0

200

100

300

400

500

Kuwait

2013 2014 2015 2016 2017

0 9.77 12.36 68.04 62.95

RM M

illio

n

Europe

Our revenue in Europe is generated by our subsidiaries Serba Dinamik International Ltd (UK) and Quantum Offshore which provide EPCC and consultancy services. Revenue recognised in the United Kingdom during FYE2017 amounted to RM4.48 million showing an increase of 65.31% from RM2.71 million in FYE2016.

2.67 2.710.630 4.48

0

1

2

3

4

5

RM M

illio

n

United Kingdom2013 2014 2015 2016 2017

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Cost of Sales

The cost of sales for FYE2017 amounted to RM2.24 billion showing an increase of 24.37% as compared to RM1.79 billion in FYE2016. The higher cost is attributable to the growth in activity during the year and is in tandem with our revenue growth of 25.55% for FYE2017.

Parts, consumables and manpower, the largest component of our cost of sales, accounted for 93.63% or RM2.10 billion of the total cost of sales for the year. This includes the cost of machine and equipment, spare parts, bolts & nuts, tools, lubricants, and the manpower required for the installation of the above- mentioned items. Depreciation of plants and machinery amounted to RM64.02 million or 2.86% of the cost of sales during FYE2017. Personnel expenses for FYE2017 amounted to RM37.92 million making up approximately 1.69% of the total cost of sales for the year. Personnel expenses refer to the compensation paid to technical personnel during the year. Professional fees are the fees paid to third-party service providers for the provision of technical consultancy, technical analysis and testing services. This component accounted for RM18.50 million or 0.83% of the total cost of sales for FYE2017.

Administrative & Other Operating Expenses

The administrative and other operating expenses incurred during FYE2017 totalling to RM105.91 million showing an increase of 46.12% as compared to RM71.85 million in FYE2016. The increase in costs incurred is mainly attributable to an increase in personnel expenses, foreign exchange loss, and other administrative expenses.

Personnel expenses incurred during the year amounted to RM28.92 million or 27.31% of the total administrative expenses. Personnel expenses include salaries and wages, staff training expenses, staff travel expenses, employee retirement plans contributions, medical claims and other employee-related expenses. Professional fees accounted for 18.62% of the administrative expenses incurred during the year or RM19.72 million. Professional fees incurred include legal fees, consultation fees, secretarial fees, audit fees, and assessment fees. Depreciation and foreign exchange loss amounted to 4.62% and 13.52% of the administrative expenses respectively.

Other administrative expenses during the year amounted to 35.92% of the administrative expenses incurred. Other administrative expenses include office expenses, maintenance, transportation, marketing, levies and rentals, utilities and office amenities made by us. Other administrative expenses also included a one-off penalty of RM15.97 million from the Inland Revenue Board for dues related to prior year tax assessment as per the section below.


RM105.91million

35.92%

13.52%

27.35%

4.62%18.62%

Personnel Expenses Depreciation Professional FeesForeign Exchange Loss Other Administrative Expenses

93.63%

0.99%

1.69%

2.86%RM2.24billion

0.83%

Parts, Consumables & ManpowerDepreciationPersonnel Expenses

OthersProfessional Fees

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Financing & Liquidity

The Group mainly utilises short-term working capital financing to finance its operations. Short-term financing at FYE2017 amounted to 96.49% or RM681.28 million of the total borrowings while long term borrowings amounted to 3.51% or RM24.76 million for the same period.

Overall, our total borrowings grew by 10.39% from RM639.57million in FYE2016 to RM706.04 in FYE2017. However, our finance cost was reduced by 10.47% from RM37.91 million in FYE2016 to RM33.94 million in FYE2017. This reduction was attributed to repayment of borrowings using our Initial Public Offering's ("IPO") proceeds. The repayment was aimed to reduce our finance cost and leverage by repaying the borrowings with the highest cost.

Our gross and net gearing ratios for FYE2017 were 0.51 and 0.26 times respectively. This shows a decrease in gross gearing from 0.78 times and net gearing from 0.46 times in FYE2016 respectively. The reduction in our gearing ratios is due to the additional injection of capital from the proceeds of our IPO, as well as the repayment of RM60.0 million of the borrowings from the proceeds of the IPO as per the detailed utilisation of the proceeds in the issued prospectus.

Our current ratio for FYE2017 also improved to 1.63 times from 1.30 times in FYE2016 showing an improvement in short term liquidity.


Taxation

Tax expenses incurred during FYE2017 increased by 86.53% to RM41.28 million from RM22.13 million in FYE2016. This shows an effective tax rate of 11.93% in FYE2017 as compared to 8.26% in FYE2016. The increase was due to a one-off tax expenses incurred of RM29.03 million for income tax assements from FYE2010-FYE2015. Additional penalties imposed by the Inland Revenue board were recognised under other administrative expenses as per the section above.

51.20 71.8533.6523.67 105.91

0

60

120

RM M

illio

n

Administrative Expenses2013 2014 2015 2016 2017

Borrowings Finance Cost

100

0

300

400

500

600

700

800

200

2013 2014 2015 2016 2017

RM M

illio

n

150.72211.22

18.13

473.33

25.13

639.57

35.01

706.04

33.943.35

11.93%

41.28 million

Profit before tax Taxation

RM346.07 million

Effective Tax Rate

Short Term Financing Long Term Financing

RM681.28 million

RM24.76 million

3.51%

96.49%

Net Gearing (Times) Gross Gearing (Times) Current Ratio

2.021.72

1.31 1.30

1.63

0.51

0.26

0.780.49

1.00

0.59

0.78

0.48

0.76

0.47

1

0

2013 2014 2015 2016 2017

2

3

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Capital Expenditure and Working Capital

Our working capital turnover was 94 days, 87 days and 61 days for receivables, inventory, and payables respectively. In comparison, the receivables turnover showed an increase of 6 days over FYE2016. Inventory turnover increased by 14 days year on year due to anticipated increased workload and materails requisition in the future. Payables turnover on the other hand decreased by 7 days as compared to FYE2016.

As at 31 December 2017, we have 439.15 million of approved and contracted for capital expenditure of which RM39.15 million will be utilised for the purpose of acquiring a new corporate office building and RM400.00 million will be used for the development of our Pengerang Eco-Industrial Park.

Utilization of Proceeds

1. Initial Public Offering

As at FYE2017, we have utilised a total of RM225.08 million or 55.29% of the total proceeds whereby the amounts allocated for working capital, repayment of borrowings and the payment of listing expenses were completely utilised. As for the expansion of business and operational facilities, RM117.98 million out of the RM300.00 million allocated or 39.33% was utilised. The utilisation for the expansion of business and operational facilities was as follows:

i. Approximately RM70.0 million was utilised for the establishment of the new MRO and IRM centre in Bintulu Sarawak.

ii. Approximately RM20.0 million was utilised for the establishment of a new facility and upgrading of existing facility in Johor Malaysia.

iii. Approximately RM15.00 million was utilised for upgrading our existing operational facilities in Malaysia and UAE.

iv. Approximately RM10.98 million was utilised for acquiring our corporate office building in Selangor, Malaysia.

v. Approximately RM2.00 million was utilised for investment and acquisition.

Within 2-36

months

Within36

months

Within12 months

Within6

months

300,000

29,300

60,000

17,800

407,100

117,975

29,300

60,000

17,800

225,075

39.33

100.00

100.00

100.00

52.29

Expansion of business & operational facilities

Working capital

Repayment ofbank borrowings

Estimatedlisting expenses

Total

TimeframeProposedUtilisationRM’000

Utilisedto dateRM’000

% utilised


102 98

76 88 94

87

61

73

685044

34

67

9190

Payables Turnover

50

0

2013 2014 2015 2016 2017

100

150

Inventory Turnover Receivables Turnonver

100,000

150,000

50,000

0

200,000

250,000

300,000

350,000

Utilised Unutilised

Expansion ofbusiness andoperational

facilities

Workingcapital

Repaymentof bank

borrowings

Estimatedlisting

expenses

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2. Private Placement

On 30 January 2018, the Company completed a Private Placement exercise whereby the Company issued 133.50 million new shares with an issue price of RM3.20 per share.

As at 28 February 2018 we have utilised a total of RM7.07 million or 1.66% of the total proceeds which was utilised for the private placement expenses. The total proceeds raised were allocated and utilised as follows:

270,486

38,301

111,113

7,300

427,200

-

-

-

7,071

7,071

-

-

-

96.86

1.66

Partial Development of Pangerang eco Industrial Park

Partial Development of Pangerang International Commercial Center

Working capital for the EPCC of the chlorine skid mounted chlor-alkali plant - Tanzania

Private placement expenses

Total

ProposedUtilisationRM'000

Utilisedto dateRM'000

%Proposed Utilisation


100,000

150,000

50,000

0

200,000

250,000

300,000

Unutilised Utilised

Deve

lopm

ent o

fPe

nger

ang

Eco

Indu

stria

l Par

k

Deve

lopm

ent o

f Pen

gera

ngIn

tern

atio

nal C

omm

erci

al C

ente

r

Wor

king

cap

ital f

or th

e EP

CC o

f the

chlo

rine

skid

mou

nted

chl

or-a

lkal

i pla

nt -

Tan

zani

a

Priva

te p

lace

men

t exp

ense

s

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Risks

1. Level of activity in the O&G Industry :

Approximately 79.55% of our revenue is derived from our Oil & Gas clients locally and overseas. Although costs incurred for our services are not directly affected by the price of oil, during periods of rising oil prices, the O&G exploration, development and production activities are expected to increase. Meanwhile, prolonged depressed O&G prices will generally lead to a curtailment in O&G activities and spending in the oil and gas industry.

However, certain activities such as maintenance of industrial assets are, to a certain extent, less affected as operations would still have to continue. In general, industrial assets require more maintenance as they age where they progressively accumulate wear and tear. In this respect, O&M services including MRO and IRM services are required to sustain safety, efficiency, and to satisfy regulatory requirements to ensure production facilities are running productively, efficiently and cost effectively.

2. Our ability to secure and negotiate for projects and contracts :

Our revenue is driven by our ability to secure contracts for our O&M and EPCC segments. Whilst primarily we have built a track record in providing O&M services and EPCC works to customers in the O&G industry in the past, we intend to diversify our customer base to include customers in the power and utilities generation industry. Our revenue growth will depend on our ability to secure both maintenance and EPCC contracts in the O&G, power generation and utilities industries.

Mitigation

We are actively diversifying our clientele base to include clients from other industries within our core expertise. Currently, we are targeting the Power Generation, Water Treatment and Utilities sectors. As of 31 December 2017, we secured over RM1.74 billion worth of non Oil & Gas related projects mainly focused on the hydro-power generation and water treatment sectors.

The Group is also expanding its business operations to incorporate the asset ownership model which is mainly aimed at providing stable long term returns.

We constantly monitor our bidding growth and success rates and compare it to industry and market averages to determine our performance. We currently possess several strength factors that contribute to our competitive advantage in bidding and securing contracts. Our strengths include:

(i) Having 23 years’ experience in the industry;(ii) Having a growing, profitable, public listed company supported by prudent financial track record;(iii) Being a PETRONAS licensed company in Malaysia;(iv) Having strong records in HSE and having implemented various safety and quality standards for our operations; and(v) Having an experienced management team.

Risks and Mitigation

Our financial condition and results of operations have been, and are expected to be affected by, but are not limited to the factors in the list below. We have also provided our mitigation plan for each of the risk factors as per the items below:


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Our revenue from overseas projects/contracts is typically denominated in USD. We maintain our cash inflow in a USD-denominated bank account, where it will be used to settle the portion of our cost of operations which are payable in USD. This provides us with a natural foreign currency hedge. Nonetheless, any unfavourable movements in the USD exchange rate may adversely affect our profitability.

In order to address the risk of delays, our project management team conducts periodic reviews with our customers during the entire phase of a project/contract. We will also hold periodic progress meetings with our customers’ management to continuously manage our customers’ expectations, work progress and be proactive to address any anticipated issues that may arise.

We source and maintain databases and directories for skilled contract workers in the market and their relevant qualifications so as to be able to recruit the required manpower as and when required. We also have the ability to recruit the graduates of our technical training programmes which are certified by City & Guilds, a vocational education organisation in the UK offering more than 500 qualifications across more than 80 countries.


As per our procurement practices and policies, we constantly review market prices and conditions and try to reduce costs via bulk-orders and timely procurement. We were also appointed by MITI as a Vendor Development Anchor company thus enabling us to create our own Vendor Development Program (" VDP"). We actively engage with our vendors and suppliers to ensure efficiency and cost reduction on both sides in a manner that helps us manage our costs and helps our vendors grow.

Risks Mitigation

3. Impact on margins :

Our margins are affected by the direct cost of operations which mainly comprises purchases of materials such as machine and equipment parts, consumables, tools and equipment, services provided by suppliers which include a combination of mechanical, electrical and/or instrumentation work, wages and salaries, and professional fees. The above cost components, save for manpower supply services contract costs, depend on the nature of the contracts and our customers.

4. Dependence on skilled professionals/engineers : We require certified, skilled and experienced technical professionals to execute the projects and contracts awarded to our Group. Due to supply and demand conditions and competition among other engineering-based companies, the number of personnel with the relevant qualifications and experience in the industry may be limited. Our cost of operations may be higher if we are required to compete for such skilled and experiance technical professionals.

5. Delays in completion of a project or work order fora contract :

The revenue derived from a specific project or work order for a contract can be impaired by a number of factors such as delays in accessing a site, work delays due to geotechnical conditions or variations at site, delay in delivery of materials and parts sourced from overseas, for which may not be within our control.

6. Impact of foregin exchange/interest rates on results of operations :

We are exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of our Group entities as we do not use any hedging instruments in our daily operations. Significant changes in foreign exchange rates may affect our performance favourably or unfavourably.

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We have expanded our operations across eleven (11) countries and five (5) main regions in an attempt to diversify our portfolio and reduce our exposure to any individual country. We also incorporate significant local participation to leverage on the local expertise and reduce the foreign element thus effectively reducing the risk exposure.

7. Overseas operational risks :

Changes in political and economic conditions in these countries could adversely affect our financial results. These political and economic uncertainties include, but are not limited to, the changes in political leadership, expropriation, nationalisation, changes in finance/interest rates or tax rates, risks of war and global economic downturn.

8. Implementation of expansion plans to own and operate facilities :

Our current business segments comprise of O&M services, EPCC works; and other products and services. We will continue to expand on our asset ownership business model to own, operate and maintain power plants and water utilities. We expect to generate revenue in the form of sales of power and provision of water treatment and other by-products. In addition, we intend to expand our operational facilities in Malaysia and overseas. A protracted delay in the above-mentioned plans may affect the implementation of our business plans and consequently our financial performance.


Risks Mitigation

In our asset ownership model, we typically take minority stakes with companies that have the operational experience in each project. By doing so, we leverage on their experience and knowledge as well as our technical know-how to best address delays and other unforeseen events.

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Moving Forward

The management of Serba Dinamik believes that 2018 will be another busy and exciting year for the Group and its stakeholders. With the recent recovery of Oil & Gas prices coupled with an overall bullish financial markets and economic growth, Serba Dinamik targets to improve its position in the market and strategically expand into new markets and levels in the supply chain in order to get closer to our goal of being a "Total Solutions Provider".Serba Dinamik's direction for 2018 will be focused on securing new markets and industries we tapped on during FYE2017. Our first step in Africa through the chlor-alkali plant in Tanzania marks our entry point to the African continent and we plan to follow up with additional projects and deals in other countries within the African region. We are working with our partners from the Islamic Corporation for Development, a subsidiary of the Islamic Development Bank to explore and gain traction via their currently existing communication networks to secure strategic projects that will ultimately enable us to penetrate the large under-served African market.

Furthermore, the Group is also expanding its end-user industries and is now actively seeking to penetrate the water, power generation and utilities industries. With our first hydro-power plants in Sabah secured in FYE2015 and under construction, the group's aim is to secure more projects of similar nature and size to diversify our revenue sources and to benefit from the additional markets served. We continued on the same business model and secured the development of three (3) additional mini-hydropower plants in early 2018 and are exploring more along the way. We are also seeking opportunities in the water treatment and utilities markets such as our participation in the development of a chlor-alkali plant which produces raw materials necessary for water treatment, our involvement in the 28 million litres per day water treatment facility in Terengganu as well as securing EPCC contract to construct a solid waste treatment plant in Hartamas - Kuala Lumpur. As the world demand for energy, water and sanitation grows, we believe that moving in this direction is essential to ensure continuous growth and profitability for the Group.

Additionally, the Group is also seeking to improve its internal capabilities for the provision of its core services. We plan to extend the company's capabilities to manufacture sophisticated parts that are in par with other Original Equipment Manufacturers ("OEM") products. This step will enable Serba Dinamik to secure more jobs with better margins as well as further strengthen its position in the engineering sector.

Finally, it had become clearly evident that the world is on the verge of the next industrial boom with the introduction of disruptive technologies such as Big Data analytics, Artificial Intelligence ("AI"), cloud computing, advanced automation systems and the Internet of Thing ("IoT"). These technologies, collectively referred to as "Industry 4.0" have the potential to change the markets and economics as we know them. We at Serba Dinamik have realised the importance of moving

up the value chain in order to remain relevant in the future and thus we have given special attention towards improving our IT capabilities and expanding our potential in the context of Industry 4.0. The recent development of QuickParking, a mobile payment application, which provides parking solutions to customers as well as Malaysia Third-Party Administrator (“MyTPA”), an appbased online management system for clinics, are our first steps as part Serba Dinamik’s strategy to strengthen its IT division capabilities with more technologically advanced projects planned ahead.

To bring together the detailed expansions mentioned earlier into the bigger picture, Serba Dinamik is aiming to secure its position and establish an array of synergetic capabilities to wider business markets and end-users. With today's market dynamics and unpredictability as well as the emergence of disruptive technologies and their mainstream adoption, we believe that expansion and growth in these directions is vital for the Group's long-term growth sustainability and its ultimate survival. That being said, the initiatives that we are undertaking will hopefully bring forth the year 2018 with plenty of work, success stories and value creation for all our stakeholders.


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BUSINESS60 Oil & Gas

65 Power Generation

67 Industry Cohort Benchmark

on ourIMPACTINDUSTRY

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In general, a company’s performance is to a certain degree affected by the developments of the industry that they serve. We are an engineering solutions service provider to the oil and gas, power generation and water utility industries. These are asset intensive industries that are heavily dependent on plant facilities and machineries to support their operations. Asset maintenance needs to be performed on these plant facilities and machineries from time to time to ensure that they function effectively, efficiently and safely at all times. As such, the following section shall discuss developments in the respective industries for some of the countries that we

Oil and Gas Global

For FYE2017, a substantial part of our revenue was derived from the oil & gas industry. As such, major local and global events and developments in the oil & gas industry may have an impact on our business.

One of the major developments which impacted on the global oil & gas industry in the past few years is the drop in global crude oil and liquid natural gas (LNG) prices. Figure 4-1 shows the average monthly crude oil and LNG prices since 2014.

Figure 4-1: Global Crude Oil and LNG Prices

Note: Imported LNG prices for December 2017 and January 2018 are estimates.FOB = free on board; CIF = cost, insurance and freight.

There was a severe deterioration in crude oil prices between June 2014 and January 2016. It was attributed to a global supply glut where production exceeded demand during this period. The average monthly Brent crude price, a global crude oil price benchmark, fell by 57.3% from a high of USD112 per barrel in June 2014 to USD48 per barrel in January 2015.

On OurINDUSTRY IMPACT

Jan-14 Jan-15 Jan-16 Jan-17 Jan-18

Subsequently, for a short period of time, average prices rebounded by 34.2% to USD64 per barrel in May 2015, after which prices continued their descent, falling by 52.1% to USD31 per barrel in January 2016. Thereafter, average prices of crude oil started to recover gradually.

As at January 2018, average monthly Brent crude prices stood at USD69 per barrel, recording a growth of 125.0% since January 2016. The recovery in crude oil prices was mainly driven by an agreement between OPEC and key non-OPEC producers to cut back crude oil production, and increased demand for petroleum products. The production cuts took effect on 1 January 2017 and are expected to continue until the end of 2018.

Average monthly prices of imported LNG in Japan, the world’s largest importer of LNG, tracked the price trend of global crude oil prices with a slight time lag. Between December 2014 and June 2015, average prices of imported LNG in Japan fell by 45.0%, from USD15.62 per million British Thermal Unit (BTU) to USD8.59 per million BTU. Similar to crude oil prices, there was a slight recovery in LNG prices before it fell to its lowest point of USD5.86 per million BTU in May 2016. As of January 2018, average prices of imported LNG stood at USD8.10 per million BTU, a recovery of approximately 38.2% since May 2016.

The crude oil and LNG price fluctuations described here have not had a significant impact on our MRO and IRM business. Oil & gas industry operators still must carry out asset maintenance on their plant facilities and equipment that extract, process and refine oil and gas, regardless of crude oil and LNG prices.

Additionally, increases in the supply of oil & gas will positively impact our business through increased demand for our MRO and IRM services. Nevertheless, demand must eventually keep pace with supply for the overall sustainability of the oil and gas industry. Figure 4-2 and 4-3 display the projected demand growth of crude oil and natural gas in the selected regions and countries.

Monthly Brent Crude Oil Spot Price, FOB Monthly Imported of LNG in Japan, CIF

BUSINESS

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Malaysia

For FYE2017, our revenue derived from Malaysia accounted for 31.92% of our total revenue where a substantial proportion was derived from the oil and gas industry. As such, developments in the oil and gas industry in Malaysia may have an impact on our business.

Malaysia’s oil and gas industry remained active despite headwinds from the recent decline in crude oil and LNG prices. Between 2013 and 2017, production of crude oil and condensate, and production of natural gas increased by a CAGR of 3.0% and 2.4% respectively (Figure 4-4 and 4-5).

In addition, refined petroleum products manufacturing grew over the same period by a CAGR of 0.9%, from 54.8 million tonnes in 2013 to 56.9 million tonnes in 2017 (Figure 4-6).

Some notable developments within the local oil and gas industry since January 2017 include :

Figure 4-4: Local Production of Crude Oil and Condensate

(Source: Bank Negara Malaysia)

Figure 4-5: Local Production of Natural Gas

(Source: Bank Negara Malaysia)

Figure 4-6: Manufacture of Refined PetroleumProducts in Malaysia

(Source: Department of Statistics Malaysia)

Figure 4-2: Projected Demand for Crude Oil

CAGR = Compound Annual Growth Rate

(Source: International Energy Agency)

Figure 4-3: Projected Demand for Natural Gas

(Source: International Energy Agency)

O I L & G A S

Region

Asia and Pacific

Middle East

Global

2017 – 2023 CAGR

2.0%

2.1%

1.1%

Region/Country

China

India

Middle East

Global

2017 – 2023 CAGR

8.5%

6.0%

2.3%

1.6%

The PETRONAS LNG Complex’s LNG Train 9 in Bintulu, Sarawak started commercial operations in January 2017. The facility is expected to increase PETRONAS LNG Complex’s production capacity by 3.6 million tonnes per year.

The PETRONAS Floating LNG (PFLNG) was successfully commissioned and delivered its first cargo in April 2017. The facility allows LNG processing to be carried out offshore, and has a processing capacity of 1.2 million tonnes per year.

The Sabah Ammonia Urea (SAMUR) plant began commercial operations in May 2017. The project which is made up of an ammonia plant, urea plant and a granulation plant, has an annual production capacity of 1.2 million metric tonnes of granulated urea, and 740,000 metric tonnes of liquid ammonia.

-

-

-

200

0

600

800

400

2013 2014 2015 2016 2017

Thou

sand

Bar

rels

per

Day

Grow

th R

ate

(%)

576603 654 667 648

1,000

- 80%

- 100%

- 40%

- 20%

- 60%

0%

-1.7%4.7% 8.5% 1.9%

-2.8% 20%

20

0

60

80

40

2013 2014 2015 2016 2017

Mill

ion

tonn

es

Grow

th R

ate

(%)

54.8 54.9 54.6 55.6 56.9

100

- 20%

- 30%

0%

10%

- 10%

-0.5% 0.1% -0.5%1.8% 2.4%

2,000

0

6,000

8,000

4,000

2013 2014 2015 2016 2017Mill

ion

Stan

dard

Cub

ic F

eet p

er D

ay

Grow

th R

ate

(%)

6,271 6,331 6,1366,536 6,904

10,000

- 80%

- 100%

- 40%

-20%

- 60%

0%4.4% 1.0% -3.1%

6.5% 5.6% 20%

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Additionally, Pengerang Integrated Complex (PIC) in southern Johor, being developed by PETRONAS at an estimated cost of USD27 billion, was approximately 87% completed as at end-of February 2018. PIC consists of the Refinery and Petrochemical Integrated Development (RAPID) as well as six other ancillary facilities that will help support RAPID’s operations. Figure 4-7 displays PIC’s components and its production capacities.

In March 2018, Sarawak announced that they will obtain full control over the upstream and downstream operations and activities of the oil and gas industry within its territory by July 2018. Currently, legal ownership and rights over oil fields in Malaysia belongs to PETRONAS, which makes cash payments to the respective federal and state governments, depending on where petroleum deposits are extracted or processed. This could spearhead developments within the oil and gas industry of Sarawak as the state will be able to generate revenues directly from upstream and downstream oil and gas activities within its territory starting July 2018. Generally, increased developments or activities within the oil and gas sector would have a positive impact on our business through higher demand for asset maintenance.

Aside from MRO and IRM services, we also perform plant turnaround maintenance, a scheduled shutdown of an entire plant for equipment inspection, repair, debottlenecking, revamps and catalyst regeneration. Plant turnaround is an expensive exercise and is executed with precision to minimise costly downtime. Figure 4-8 depicts PETRONAS’ forecast of their own plant turnaround activity in Malaysia for the coming years.

PETRONAS expects plant turnaround activities to pick up substantially after 2020. PIC, which is scheduled to begin commercial operations in 2019, is expected to initiate its own plant turnaround project from 2022 onwards. Figure 4-8: Forecasted Number of Turnaround Projects

(Source: PETRONAS)

Note: Forecast includes activities driven by PETRONAS Group of Companies

only which may have been contracted out at the time of reporting.

O I L & G A S

Supporting Facilities

PengerangCogeneration

Plant

PengerangDeepwater Terminal 2

Utilities & Facilities

Raw WaterSupply Project

RegasificationTerminal 2

Air SeparationUnit

(Source: PETRONAS)

Refinery and Petrochemical Integrated Development

Refinery

Processing capacity of 300,000 barrels of crude

oil per day

Production capacity of more than three (3) million

tonnes of Ethylene, Propylene, C4 and C6

olefin products per year

Petrochemical Complex

Figure 4-7: Pengerang Integrated Complex at Pengerang, Johor

In January 2018 the Highly Reactive Polyisobutene (HR-PIB) plant was successfully started up in Gebeng, Kuantan. The plant has the capacity to produce 50,000 metric tonnes of HR-PIB per year.

-

5

0

15

20

10

2018 2019 2020

Num

ber o

f Tur

naro

und

Proj

ects

10

16

5

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Middle East

For FYE2017, 59.04% of our total revenue was derived from the Middle East, most of which were from the oil and gas industry. For FYE2017, our top four revenue contributors in the Middle East were Qatar, Bahrain, Saudi Arabia and United Arab Emirates (UAE). As such, developments in the oil and gas industry for these countries may have an impact on our business.

Oil and gas production in the Middle East remained strong despite the fall in global crude oil prices. Between 2012 and 2016, crude oil production in the Middle East grew by a CAGR of 2.5% from 24.1 million barrels per day (mbpd) in 2012 to 26.6 mbpd in 2016. Crude oil production in Qatar, Bahrain, Saudi Arabia and UAE recorded a CAGR of -2.9%, 4.3%, 1.7% and 3.9% respectively. (Figure 4-9 to Figure 4-12)

Figure 4-9: Crude Oil Production in Qatar

(Source: OPEC)

Figure 4-10: Crude Oil Production in Bahrain

(Source: OPEC)

O I L & G A S

Figure 4-11: Crude Oil Production in Saudi Arabia

(Source: OPEC)

Figure 4-12: Crude Oil Production in UAE

(Source: OPEC)

Between 2012 and 2016, natural gas production in the Middle East grew by a CAGR of 3.3% from 596 billion standard cubic metres (bscm) in 2012 to 679 bscm in 2016. Natural gas production in Qatar, Bahrain, Saudi Arabia and UAE recorded a CAGR of 3.9%, 12.9%, 2.8% and 3.0% respectively.(Figure 4-13 to Figure 4-15)

The Middle Eastern oil & gas industry has been shifting its focus from the upstream segment towards the downstream segment, as the region seeks to diversify by increasing exports of specialised refined petrochemical products. Between 2017 and 2023 the Middle East is forecasted to post the largest net oil refining capacity additions of any region, with the region’s refining capacity forecasted to grow from 9 mbpd in 2017 to 11 mbpd in 2023.

200

0

600

800

400

2012 2013 2014 2015 2016

Thou

sand

Bar

rels

per

Day

Grow

th R

ate

(%)734 724 709 656 652Figure 4-9

1,000

- 50%

- 70%

- 10%

10%

- 30%

0.0% -1.4% -2.1%-7.5%

-0.6%

100

0

300

400

200

2012 2013 2014 2015 2016

Thou

sand

Bar

rels

per

Day

Grow

th R

ate

(%)

198 203

- 30%

- 50%

30%

10%-8.9%

14.5%

2.5% 0.0% 1.0%

- 10%173203 205

4,000

0

12,000

16,000

8,000

2012 2013 2014 2015 2016

Thou

sand

Bar

rels

per

Day

Grow

th R

ate

(%)

9,763 9,637 9,71310,193 10,460

- 90%

30%

- 10%

4.9%

-1.3% 0.8%4.9% 2.6%

- 50%

2,000

0

6,000

4,000

2012 2013 2014 2015 2016

Thou

sand

Bar

rels

per

Day

Grow

th R

ate

(%)

2,6532,797 2,794

2,989 3,088

- 70%

30%

10%3.5% 5.4%

-0.1%7.0%

3.3%

- 30%

- 10%

- 50%

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Figure 4-13: Natural Gas Production in Qatar

Source: OPEC)

Figure 4-15: Natural Gas Production in Saudi Arabia

(Source: OPEC)

Figure 4-14: Natural Gas Production in Bahrain

(Source: OPEC)

Figure 4-16: Natural Gas Production in UAE

(Source: OPEC)

Notable projects that have come on stream recently and which are expected to come on stream in the near future include:

- Sadara Petrochemical Complex in Saudi Arabia achieved full commercial operations in 2017. The facility has the capacity to produce more than 3 million tonnes of high-value performance plastics and specialty chemical products annually.

- The Jazan refinery in Saudi Arabia is expected to commence full operations in 2019, and is expected to have production capacity of 400,000 bpd.

- Expansion of Jebel Ali refinery in UAE. The expansion which is expected to be completed in 2019, will increase the refinery’s existing capacity from 140,000 bpd to 210,000 bpd.

- Expansion of Sitra Refinery in Bahrain. The expansion, which is expected to be completed in 2022, will increase the refinery’s existing capacity from 267,000 bpd to 360,000 bpd

O I L & G A S

50

0

150

200

100

2012 2013 2014 2015 2016

Billi

on S

tand

ard

Cubi

c M

eter

s

Grow

th R

ate

(%)

157.1 177.6 174.1 181.4 182.8

250

- 50%

- 70%

- 10%

10%

- 30%

30%8.1%

13.1%-2.0% 4.2% 0.8%

300

50

0

150

200

100

2012 2013 2014 2015 2016

Billi

on S

tand

ard

Cubi

c M

eter

s

Grow

th R

ate

(%)

99.3 100.0 102.4 104.5 110.9

- 50%

- 70%

- 10%

10%

- 30%

30%7.7%

0.7% 2.3% 2.0% 6.1%

10

0

30

40

20

2012 2013 2014 2015 2016

Billi

on S

tand

ard

Cubi

c M

eter

s

Grow

th R

ate

(%)

13.717.2

20.6 21.3 22.4

- 50%

- 70%

- 10%

10%

- 30%

30%8.9%

25.3% 19.8%

3.2% 5.0%

20

0

60

80

40

2012 2013 2014 2015 2016

Billi

on S

tand

ard

Cubi

c M

eter

s

Grow

th R

ate

(%)

54.3 54.6 54.260.2 61.1

- 50%

- 70%

- 10%

10%

- 30%

30%

3.8% 0.6% -0.7%

10.9%1.5%

100

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Malaysia

Electricity generation in Malaysia has been growing in line with consumption levels. Between 2013 and 2017, growth of electricity consumption which recorded a CAGR of 4.6%, slightly outpaced that of electricity generation which grew at a CAGR of 4.3% (Figure 4-17). As at 2017, electricity generation stood at 156.1 Terawatt hours (TWh), exceeding total consumption by approximately 14.3 TWh.

Figure 4-17: Electricity Generation and Consumption in Malaysia

(Source: Department of Statistics Malaysia)

Development of power projects in Malaysia between 2017 and 2024 is expected to increase Malaysia’s installed generation capacity by approximately 11,143MW in Peninsular Malaysia and Sabah. Some of these projects include, among others, 1,000MW Manjung Five Power Plant in Perak, 2,000MW Jimah East Power Plant in Negeri Sembilan and the 1,440MW Track 4A Power Plant in Pasir Gudang, Johor.

Power generation projects that are currently under construction in Sarawak include, among others, the 600MW coal-fired power plant in Balingian, the 1,285MW Baleh Hydroelectric Project and a 800MW combined cycle gas plant for the proposed extension of Bintulu’s Tanjung Kidurong Power Station.

We are also involved in renewable energy primarily through our small hydropower plants. Renewable energy generation has also pick up pace in Malaysia over the years. Between 2013 and 2017, renewable energy generated under the Feed-in Tariff (FiT) system recorded a CAGR of 22.1%, from 373.1GWh in 2013 to 828.8GWh in 2017 (Figure 4-18).

Figure 4-18: Renewable Energy Generation in Malaysia

(Source: Sustainable Energy Development Authority Malaysia)

In general, the FiT system obliges companies that hold a licence to distribute electricity such as Tenaga Nasional Berhad and Sabah Electricity Sdn Bhd, to buy renewable energy generated by individuals or companies that hold a feed-in approval certificate issued by the Sustainable Energy Development Authority Malaysia (SEDA).

We also operate within the power generation industry, especially in Malaysia and Indonesia. As such, developments in the power generation industry in Malaysia and Indonesia may have an impact on our business.

GENERATIONPower

Global

Between 2017 and 2022, total power generating capacity of the global market, Middle East, and Asia and Pacific regions is forecasted to grow at a CAGR of 1.6%, 2.2% and 2.2% respectively. In general, an increase in forecasted power generating capacities will have a positive impact on our business through higher demand for plant maintenance service.

Electricity Generation Electricity Consumption

0

120

180

60

2013 2014 2015 2016 2017

Tera

wat

Hou

rs (T

Wh) 132.0 137.4 141.1 152.9 156.1

118.5124.1 127.1

141.8138.2

500

0

1,000

2013 2014 2015 2016 2017

Giga

wat

t Hou

rs

Grow

th R

ate

(%)

373.1

528.1 585.8615.2

- 200%

- 300%

- 0%

100%

- 100%

200%162%

42% 11% 5%

1,500

35%828.8

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Figure 4-19: Renewable Energy Generation in 2017

(Source: Sustainable Energy Development Authority Malaysia)

The sources which contributed to Malaysia’s total renewable energy generation in 2017 are as displayed in Figure 4-19.

Between 2018 and 2020, Malaysia’s installed power generation capacity is expected to increase cumulatively by 539.4MW. Capacity increments are expected to be driven primarily by increases in small hydro power generating capacities.

Indonesia

We are involved in the power generation industry in Indonesia through our small gas power plant in Ambon Island, Indonesia. Developments in the power generation industry in Indonesia will continue to provide opportunities for power producers.

Under Indonesia’s Power Supply Business Plan (“RUPTL”) 2017-2026, electricity sales are projected to grow by an average annual rate of 8.3%, from 235 Gigawatt hours (GWh) in 2017 to 483 GWh in 2026 (Figure 4-20). This projected increase in demand for electricity will positively benefit our business as it provides us the opportunity to further development our power plants in Indonesia.

Figure 4-21: Generating Capacity in Indonesia

Over the period, Indonesia’s power generation capacity is forecasted to increase by 77.9 Gigawatts (GW) in order to cater for the projected increase in electricity demand. This would bring its power generation capacity to 129.8GW in 2026, an increase of 150.1% from its current capacity of 51.9GW as at 2016 (Figure 4-21). The increase in power generating capacity of Indonesia will eventually lead to higher demand for power generation plant maintenance services. This will provide us an opportunity to penetrate the Indonesian power generation market with our MRO and IRM services.

Figure 4-20: Projected Electricity Sales in Indonesia

(Source: Ministry of Energy and Mineral Resources Indonesia)

P O W E R G E N E R AT I O N

(Source: Ministry of Energy and Mineral Resources Indonesia)

200

0

400

600

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Giga

wat

t Hou

rs (G

Wh)

100

300

500

235 254 276302 330 357 386

417450 483

40

0

80

140

120

20172016 2018 2019 2020 2021 2022 2023 2024 2025 2026

Tota

l Cap

acity

(GW

)

20

60

100

51.9 54.660.6

79.285.8 93.7101.6107.1114.4

125.7129.8

Existing Capacity Additional Capacity

9%

19%

4

4%

28%

Small HydroBiogasBiomassSolar PV

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We have undertaken benchmarking to provide our relative performance to our peers. Two cohort groups comprising companies or groups with comparable operations were used as benchmarks.

1. Serba's financial ratios for 2016 reflects the 12 months performance of Serba Dinamik Group Berhad prior to the incorporation of Serba Dinamik Holdings and the subsequent acquisition of Serba Dinamik Group Berhad and its subsidiaries.2. Serba's was listed on the Main Market of Bursa Securities on 8 February 2017.3. Malaysia cohort is the average of 11 selected comparable companies or groups whose head offices are in Malaysia. It excludes Serba Group. 4. Foreign cohort is the average of 13 selected comparable companies or groups whose head offices are outside of Malaysia. It excludes Serba Group.5. Companies or groups within each cohort group consists of selected operators that undertake asset maintenance for the oil & gas industry in Malaysia or Middle East. This is to ensure that companies or groups selected for benchmarking have business operations that are comparable to Serba Group.6. While comparable companies' latest financial information were used, their financial years may differ from Serba Group's financial period.

(Source: Vital Factor Consulting Sdn. Bhd.)

EBIT Margin Gross Profit Margin

Current Ratio

Return on Assets Return on Equity

Gearing Ratio

COHORT BENCHMARKIndustry

Serba

Malaysia

Foreign

ebit margin

2017

2016

14%

7%

2%

3%

6%

14%Serba

Malaysia

Foreign

2017

2016

18%

24%

15%

17%

16%

17%

Serba

Malaysia

Foreign

2017

2016

12%

4%

0%

4%

2%

17%Serba

Malaysia

Foreign

2017

2016

22%

7%

3%

10%

8%

42%

Serba

Malaysia

Foreign

Current Ratio

2017

2016

1.6

2.4

1.4

2.3

1.4

1.3 Serba

Malaysia

Foreign

2017

2016

0.5

0.9

0.7

0.6

2.2

0.8

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CORPORATESUSTAINBILITY REPORT 70 Group CEO Sustainability Message

72 Our Sustainability Report

73 Our Sustainability Framework

76 What We Stand For

78 Sustainability of Our Business

85 Creating Economic Value

91 Business Ethics & Governance

92 Environmental Consciousness

96 Our Workforce and Society

102 Our Corporate Social Responsibilities

note: this report has been compressed significantly in order to be...

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