Serba Dinamik Annual Report 2016

2016 Annual Report 011 CEO STATEMENT (Cont’d) Notes: [1] http://www.nst.com.my/news/2017/03/222912/challenges-persist-og-companies [2] http://asia.nikkei.com/magazine/20170316/Business/Asia-braces-for-an-energy-M-A-bonanza FORWARD LOOKING The O&G industry environment is expected to remain cloudy for 2017, arising from the increasing production by shale oil producers and oil prices making a sluggish recovery. Industry analysts and researchers maintain their assumption of Brent crude oil prices at an average price of US$ 45-50 per barrel for the rest of the year. [1] Nevertheless, the merger and acquisition (“M&A”) activity in Asia’s energy sector is expected to accelerate this year with a record of US$20 billion worth of deals closed in January alone. The spike in M&A activity is mainly due the stabilisation of crude oil prices and major Western oil producers seeking to divest its assets within the region, which includes Myanmar, Bangladesh, Malaysia, China and New Zealand. The demand for LNG in Asia is also estimated to increase by about 40% to 270 million tonnes by year 2025 from the current demand of 190 million tonnes in 2016. [2] Therefore, we believe that these factors will work in favour of the Group’s business expansion strategy to acquire potential assets that will drive additional value to the Group. Our potential targets for acquisition are mainly parts manufacturers as approximately 40% of costs are material costs. The successful acquisitions will provide margin improvement to the Group’s business, reducing costs by 1-2% as well as enable margin generation of approximately 5-10% by trading of parts. Concurrently, we are focused on expanding our existing business to offer a broader range of products and services to include total plant and facility maintenance and turnaround, which is complementary to our core expertise of O&M services and EPCC works. We will also extend our MRO of rotating equipment to cover marine engines and power generation facilities in large vessels. Ultimately, we aim to leverage on our expertise in O&M services and EPCC works to enlarge our industry coverage as well as extend our global presence across other surrounding countries to emphasise our involvement within the Middle East and European Union countries. ACKNOWLEDGEMENT As we conclude a remarkable year in the company’s corporate journey, I take this opportunity to express my humble gratitude to my fellow Board of Directors, who have been consistently positive and persevered, making it a breeze to weather through the industry’s challenging times together. I also thank the dedicated key management and team of staff for their relentless efforts in contributing to Serba Dinamik’s success thus far. On behalf of the Group, I would like to extend my greatest appreciation to our market partners and shareholders for their continued confidence in the Group. Your unceasing support further motivates us to strive for another year of positive performance to create sustainable and growing value for all our stakeholders. DATO’ DR. IR. MOHD ABDUL KARIM BIN ABDULLAH Group Chief Executive Officer