KUALA LUMPUR (March 26): Since May last year, troubled oil and gas (O&G) company Serba Dinamik Holdings Bhd has been in the news for all the wrong reasons.

This is in stark contrast to the positive news flow from the time of its initial public offering in February 2017 until May 2021, when word of its accounting issues surfaced.

Serba Dinamik’s issues with auditors escalated to disputes with frontline regulator Bursa Malaysia and a feud with EY Consulting Sdn Bhd, which undertook a special independent review and was tasked to come up with a factual findings update (FFU) on KPMG’s findings.

Firstly, its former auditor KPMG flagged what it thought were questionable transactions valued at RM2.32 billion, trade receivables of RM652 million, and materials on site balance of RM569 million.

There were other issues as well, such as suppliers having similar registered addresses, and having small paid-up capitals while undertaking transactions of between RM60 million to RM96 million. In total, these transactions amounted to RM481 million. 

Also in the spotlight were customers and suppliers in Bahrain whose office addresses could not be located. Transactions with the companies from Bahrain amounted to US$101 million (RM417.48 million then) while trade receivables balance stood at US$24 million (RM99.2 million then).    

While Serba Dinamik brushed aside KPMG’s grouses, the appointment of EY Consulting saw the O&G company change tack and focus on preventing EY Consulting’s FFU from being made public.

The market reacted swiftly. Investors voting with their feet, selling down Serba Dinamik, shedding more than RM4.7 billion in market value, and its shares tumbled from about RM1.60 prior to KPMG’s whistleblowing to 35 sen, just before the counter was suspended from trade in October last year.   

Flicking through the EY Consulting report, which is part of Bursa Malaysia’s bundle of documents in its suit against Serba Dinamik, it becomes apparent why the O&G company is reluctant to let the findings of the EY Consulting report be made public.

The EY Consulting report, in a nutshell, questions why Serba Dinamik was in possession of company stamps — both of its vendors and those of national oil major Petronas, other oil majors, and of the company’s many suppliers.

In summary, EY Consulting stopped short of suggesting that Serba Dinamik had been raising cash — both via borrowings and cash calls — only to take or transfer funds to suppliers and vendors which were under Serba Dinamik’s control.

Read the full story in the March 28 issue of The Edge Malaysia weekly.

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