Serba Dinamik hits limit down on company's audit issues after trading resumed today

Serba Dinamik hits limit down on company's audit issues after trading resumed today
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KUALA LUMPUR (May 31): Shares in Serba Dinamik Holdings Bhd hit limit down at the opening bell, plunging some 30% or 48 sen to RM1.13, with 2.72 million shares changing hands. 

Today was the first day the stock resumed trading after the group suspended it last Thursday and Friday. The counter last closed at RM1.61, valuing the group at RM6 billion. 

The share price took a dive after the board of directors was informed by the company's external auditor KPMG on some matters pertaining to its statutory audit.

Subsequently, in a filing exchange last Tuesday (May 25), the oil and gas (O&G) services and engineering group said it was in the midst of appointing an independent firm to commence a special independent review to assess the veracity and accuracy of the matters.

Meanwhile, group managing director and chief executive officer (CEO) Datuk Dr Mohd Abdul Karim Abdullah said the group had done nothing wrong and described KPMG as acting in an “unfair” and “peculiar” manner for going straight to the company’s independent directors to address the audit issues — instead of briefing the management first.

The management also blamed KPMG for delaying the completion of the statutory audit, which resulted in Serba Dinamik missing the audit deadline.

“The Securities Commission [Malaysia] has their rights; Bursa Malaysia has their rights [to investigate]. Based on what we believe, we have done nothing wrong.

“We are firm in the facts that we have put forward, and we strongly believe the independent firm will come out with the findings to see the differences between what we have said and what KPMG has [pointed] out,” said Abdul Karim during a virtual press conference on Saturday. 

Notably, Karim is the largest shareholder of Serba Dinamik, with a 26.93% stake in the company.

The virtual press conference came a day after Serba Dinamik’s second largest shareholder Datuk Abdul Kadier Sahib issued a notice to propose the removal of KPMG as its external auditor. Kadier, holding a 15.96% stake, is also the company’s non-independent non-executive director.

Meanwhile, prior to Kadier proposing to change the external auditor, Serba Dinamik’s board already wanted KPMG to resign, according to non-independent executive director Datuk Syed Nazim Syed Faisal. 

According to him, KPMG had yet to revert to Serba Dinamik’s response to the former’s queries more than three weeks ago on May 6. The auditor did not provide any direct or immediate timeline to conclude its audit.

“From our perspective, as per the request of the shareholder (Kadier), there are concerns raised with regard to our timeline of the audit progress. We believe we have addressed the issue, and the shareholder who is also on the board also takes this matter quite seriously.

“What we intend to do is to ensure the main agenda of us is to ensure the day-to-day operations are not interrupted and the audit is completed on time,” said Syed Nazim, who is also the company’s chief financial officer (CFO), during the virtual press conference on Saturday.

To recap, in a Bursa filing earlier, Serba Dinamik said KPMG had raised issues relating to sales, trade payables and material on site balances involving 11 parties which accounted for total sales transactions of RM2.32 billion, a trade receivables balance of RM652 million and materials on site balance of RM569 million.

Based on the unaudited accounts, Serba Dinamik’s receivables had ballooned to RM1.865 billion as at end-2020 from RM880 million at end-2017.

Coincidentally, Serba Dinamik has changed its financial year end to June 30, 2021 from Dec 31, 2020. This raised some eyebrows, particularly after news of KPMG having problems verifying some suppliers and customers, as well as certain contracts.

Syed Nazim, however, explained that the change in the financial year end was to give KPMG an additional timeline to complete the audit.

He noted that the current audit process by KPMG “has been stopped to complete the independent review”.

“Due to the issues raised and the fact that the audit has been stopped to complete the independent review, this led to a slight [concern] of the shareholder itself,” Syed Nazim said.

Read also:
KPMG raised audit issues on transactions involving over RM3 billion, says Serba Dinamik
Serba Dinamik's second largest shareholder proposes removal of KPMG as auditor
Serba Dinamik board wanted KPMG to resign, but auditor refused to do so, says executive director Syed Nazim
'We have done nothing wrong,' says Serba Dinamik MD Abdul Karim
Minority shareholders may look to EPF and KWAP for truth of Serba Dinamik’s financials
MSWG urges Serba Dinamik minority shareholders to vote against removal of external auditor
Stocks linked to Serba Dinamik's Karim plunge as counter hits limit down

Surin Murugiah