KUALA LUMPUR (June 28): Serba Dinamik Holdings Bhd’s share price plunged as much as nine sen or 21.95% to a new all-time low in Bursa Malaysia morning trade today at 32 sen before paring losses after the engineering solutions provider said last Friday several independent directors had collectively resigned over the company’s legal action against its external auditor KPMG PLT in a widely-watched corporate dispute involving Serba Dinamik’s statutory audit matters.
The company’s share price pared losses at 35.5 sen as at 11.09am, with some 404 million units transacted.
Serba Dinamik was Bursa’s most-active stock.
On Friday, Serba Dinamik said in Bursa filings that independent non-executive directors Rozilawati Basir, Sharifah Irina Syed Ahmad Radzi, Datuk Seri Tengku Hasmuddin Tengku Othman and Hasman Yusri Yusoff had resigned due to disagreement on Serba Dinamik’s decision to commence legal action against KPMG.
Serba Dinamik said Masleena Zaid, who was appointed independent non-executive director on June 11, had also resigned “due to personal commitment”.
Masleena’s resignation was effective on Friday (June 25), Hasmuddin and Hasman’s resignations were effective on Thursday (June 24) while Rozilawati and Sharifah Irina’s resignations were effective on Wednesday (June 23), according to Serba Dinamik
Today, Hong Leong Investment Bank Bhd analyst Low Jin Wu wrote in a note that in Hong Leong’s opinion, the recent two key developments, namely suing KPMG besides updates on Serba Dinamik’s five independent directors’ resignation, may create a perception issue towards Serba Dinamik.
"As such, we reckon these recent developments will possibly continue to exert selling pressure on the stock while buying interest is unlikely to resurface until its audit issues are resolved,” Low said.
The analyst said Hong Leong has downgraded Serba Dinamik shares from "hold" to "sell" at a lower target price (TP) of 28 sen from 78 sen previously.
TA Securities Holdings Bhd analyst Kylie Chan Sze Zan wrote in a note today that Serba Dinamik’s integrity will continue to be questioned by the authorities as well as the company's financiers, clients, investors and stakeholders as they weigh KPMG’s resignation as Serba Dinamik’s auditor and the five independent directors’ resignation.
"As such, negative speculation and controversy will continue to weigh on stock sentiment,” said Chan, who indicated that TA Securities reduced its Serba Dinamik share TP to 28 sen from RM1 while maintaining its "sell" call for the stock.
"We believe that attention should now focus on the release of (Serba Dinamik’s) audited FY20 financial statements and annual report (AR). This would be published by a new auditor to be appointed by Serba Dinamik. The AR, coupled with the new auditor’s review of KPMG’s findings, would shed more light on Serba Dinamik’s financials. However, given the rushed appointment of a new auditor, it is possible that Serba Dinamik might be unable to meet the deadline (Oct 31) for AR publication.
"Additionally, we understand that at this juncture, in spite of KPMG’s resignation, Bursa requires that the independent review must still proceed. The scope of the review must specifically address, to the satisfaction of the exchange, the issues raised by KPMG,” she said.
Serba Dinamik has been in the news since the end of May, when the company announced that KPMG had informed the firm of some matters pertaining to its statutory audit.
According to Serba Dinamik’s Bursa filing on May 25, the company was in the midst of appointing an independent firm to commence a special independent review to assess the accuracy of the matters.
On May 28, Serba Dinamik said in a response to Bursa’s query that the matters highlighted by KPMG on May 3 relate to, among others, certain customers’ confirmation relating to sales transactions and trade receivables.
The matters highlighted by KPMG include "trade receivables balances and sales transactions for information technology contracts”, the company added.
On Bursa today, Serba Dinamik shares were traded at 35.5 sen as at 11.09am for a market capitalisation of about RM1.32 billion based on the company’s 3.71 billion issued shares.
Serba Dinamik’s share price had fallen to current levels from RM1.61 on May 25, 2021, when its market value stood at around RM5.97 billion.