SERBA Dinamik Holdings Bhd seems to have priced in most of the downside – unless there are more unforeseen events occurring.
According to UOB Kay Hian Research, the current price is close to the company’s adjusted initial public offering (IPO) price of about 56-60 sen and below the book value per share (BVPS) of 96 sen.
“If there are no updates from (external auditor) KPMG, and Serba Dinamik’s independent auditor requires some time to complete its work, there will not be a major near-term re-rating at this juncture,” reckoned analyst Kong Ho Meng in a company update.
UOB Kay Hian Research has retained its “hold” rating on Serba Dinamik with a new target price of 70 sen or 60.7% discount from RM1.78 previously with an entry price of 55 sen.
To re-cap, Serba Dinamik has decided not to remove its external auditor and targets to appoint its independent auditor by June this year.
The global integrated oil & gas (O&G) service provider also said it has responded to KPMG’s matters (dated May 3) on May 6 in which KPMG has not followed up as of end-May.
Commenting on uncertainties, UOB Kay Hian Research said some events that warrant further downside and downgrade to its call include:
- KPMG decides to resign; a resignation move from an external auditor will mark an event with the most serious ramifications on the company. Auditors can resign if they suspect fraud, malpractice or mismanagement which were unable to be resolved with management;
- Serba Dinamik’s owners massively dump their shares, suggesting they have something to hide; or
- Independent auditors conclude their accounts with adverse opinion.
On behalf of shareholders, UOB Kay Hian Research hopes that Serba Dinamik would consider to – once it has positively clears its accounting issues:
- Slashing dividends to preserve buffer in view of uncertainties;
- Reduce or fine-tune a system to allow companies and transactions to be easily traceable and verified by auditors, or else,
- Shed away some operations and asset ownership companies to be simpler and more straightforward.
“This is because due to Serba Dinamik’s growth to a global complicated structure it has today, we have to assume that there will always be another incident where auditors may raise special audit matters but face insufficient time to verify all of them,” added the research house.
At the close of this morning’s trading session, Serba Dinamik was up 0.5 sen or 0.8% to 63 sen with 50.29 million shares traded, thus valuing the company at RM2.35 bil. – June 10, 2021
