MALACCA Securities Research has presumably become the first research house to suspend coverage of Serba Dinamik Holdings Bhd on grounds that under the prevailing market events, “on-going coverage is now impracticable to comply with applicable regulations”.
“Hence, we have decided to suspend our coverage on Serba Dinamik,” justified analyst Kenneth Leong in a company update. “Given the prolonged uncertainties, we have now lowered our valuations metrics and our fair value is 57 sen (from RM1.30 previously).”
In line with the latest development affecting the company, Malacca Securities Research said it has also changed its valuation metrics – from P/E (price-to-earnings ratio)-based valuations – by pegging a 40% discount to the company’s FY2021F NTA (net tangible asset) of 95 sen to justify for greater accuracy of the company’s valuations at current juncture.
“The discount is to reflect the potential impairment and/or provisions that may be pencilled into the accounting books upon the completion of the special independent audit review,” noted the research house.
With the current on-going uncertainties, Malacca Securities Research expects the downward bias undertone surrounding the Serba Dinamik’s share price to prolong over the next couple of months till its audited annual report is completed and published to public – tentatively on Oct 31 or at the completion of a special independent audit review whichever comes first.
“The on-going saga that resulted in diminishing of investors’ confidence is expected to see both institutional and retail investors continue to keep their hands off (from the stock) for the time being,” opined the research house.
“Hence, we reiterate our stance to advise investors to steer clear of further position, pending for further clarity from the special independent audit review.”
The latest update pertaining to audit matters has resulted in the resignation of external auditor KPMG with immediate effect yesterday (June 24). The move came as KPMG is unable to independently continue its audit engagement to discharge its professional duties as auditors of Serba Dinamik.
“For the time being, Serba Dinamik is engaging with Ernst & Young Advisory Services Sdn Bhd (EY) on the appointment of a special independent audit review which may see the appointment taking place today (after some delay due to the change of scope works),” added Malacca Securities Research.
The delay came as Serba Dinamik has filed a civil claim against KPMG for alleged negligence as well as for breach of contract and statutory duties.
At 2.37pm, Serba Dinamik was down 7 sen or 13.08% to a new low of 46.5 sen with 234.26 million shares traded, thus valuing the company at RM1.73 bil. – June 25, 2021
