EVEN as Serba Dinamik Holdings Bhd has to grapple with search for new independent directors, it must not lose sight of the looming Oct 31 deadline for the release of its audited FY2020 financial statements and annual reports (ARs).
While the AR – coupled with the new auditor’s review of its former external auditor KPMG PLT’s findings – would shed more light on the company’s financials, TA Securities Research is concerned that Serba Dinamik might be unable to meet the deadline given the rushed appointment of a new auditor.
“Additionally, we understand that at this juncture – in spite of KPMG’s resignation – Bursa Malaysia requires that the independent review must still proceed. The scope of the review must specifically address to the satisfaction of the exchange issues raised by KPMG,” justified analyst Kylie Chan Sze Zan in a results review.
“As such, we eagerly await the results of this review (potentially by Ernst & Young Advisory Services Sdn Bhd ) to provide more clarity and facts.”
On Friday (June 25), Serba Dinamik reported that it posted a net profit of RM112.52 mil for its 5Q FY6/2021 ended March 31, 2021 on the back of RM1.38 bil in revenue.
There is no comparison for the quarter under review as Serba Dinamik has changed its financial year end to June 30, 2021 from Dec 31, 2020 on May 7.
Amid looming uncertainties, TA Securities Research has further revised downward Serba Dinamik’s target price to 28 sen (from RM1 previously) while retaining its “sell” rating.
Meanwhile, Hong Leong Investment Bank (HLIB) Research downgraded Serba Dinamik to “sell” (from “hold” previously) with a target price of 28 sen (from 78 sen previously) to reflect the two recent developments, notably (i) its decision to sue KPMG and (ii) resignation of five of its independent directors, both of which may bring perception risk to the company.
“In a nutshell, we believe 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,” added HLIB Research.
While it makes no comment on Serba Dinamik’s public spat with KPMG “which may or may not have its merits’, PublicInvest Research is troubled at the recent resignations of the resignation of the company’s five independent directors due to differences in opinion.
“We make no changes to earnings at this juncture though we change our valuation methodology from earnings-based to book value-based to guard against potential uncertainties ahead,” deduced analyst Nurzulaikha Azali.
“We apply a discount of 50% to its trailing 12-month book value of 88 sen and derive our new target price of 44 sen (from the earnings-based RM1.39 previously).
“While we maintain our call at neutral, we continue to suggest that investors stay on the sidelines in the interim given the uncertainties ahead.”
At 9.15am, Serba Dinamik was down 7.5 sen or 18.29% to 34.5 sen with 167 million shares traded, thus valuing the company at RM1.25 bil. – June 28, 2021
