THE results review of Serba Dinamik Holdings Bhd’s 1Q FY6/2022 marks the last commentary the company is getting from Kenanga Research and Hong Leong Investment Bank (HLIB) Research.
Both research houses are ‘temporarily’ taking the global integrated oil & gas (O&G) service provider off their radar given lingering uncertainties over the company’s future since its trading suspension on Oct 22.
“With the group’s outlook and corporate governance (CG) status remaining uncertain, and coupled with the stock still being under suspension since Oct 22, we cease coverage on the counter for the time being,” justified analyst Steven Chan in results review-cum-ceasing coverage note.
“Post results, we cut our FY2022E/FY2023E core net profit by 68%/62% after factoring in weaker job flows and poorer margins assumption.”
Elaborating further, Kenanga Research deemed Serba Dinamik’s 1Q FY6/2022 results as completely missing expectations with the company posting its first ever quarterly loss ever.
According to the research house, the company reported 1Q FY2022 core net loss of RM42 mil – completely missing expectations against its full-year profit forecast of RM474 mil and consensus’ RM359 mil due to slow job flows and margins deterioration in both its core segments of operation and maintenance (O&M) and engineering, procurement construction and commissioning (EPCC).
“With the company currently in litigation against its former auditors KPMG, its appointed special independent reviewer (SIR) Ernst & Young Consulting Sdn Bhd (EY) as well as Bursa Malaysia, we believe questions revolving around the group’s CG could still persist.,” opined Kennaga Research.
“We also believe conclusive outcomes from its special independent review report and its audited annual report are the most resolute way of putting these uncertainties to rest.”
However, last week, the group announced that it was unable to finalise its audited financial statements in a timely manner before the due date of Nov 30 with Bursa also rejecting its second extension of time application.
“Additionally, any failures to meet debt repayment obligations, especially its coupon payments for its US$300 mil sukuk, reportedly due May next year, will put the group’s balance sheet into further risk,” added the research house.
Meanwhile, HLIB Research contended that it ceased coverage on Serba Dinamik due to the absence of investor engagement, uncertainty from the still impending disclosure of the SIR and the delay in the release of the group’s annual report which is a major stumbling block for the research house to undertake meaningful fundamental analysis.
“Our previous ‘sell’ rating and target price of 24 sen on Serba should no longer be used as a reference point going forward,” added the research house.
Serba Dinamik was last transacted at 35 sen at the close of the mid-day trading on Oct 22 prior to the trading suspension of its shares/warrants, hence giving the company a market capitalisation of RM1.31 bil. – Dec 1, 2021
