Serba Dinamik top losing stock over auditor issues
KUCHING: Analysts believe Serba Dinamik Holdings Bhd’s (Serba Dinamik) request for the removal of its current auditor, KPMG, could raise yet more difficulties for both the independent review and audit progress given the current Covid19 movement restriction.
Meanwhile yesterday, the stock led the pack in the top losers list as it dropped by 48 sen or 29.81 per cent to RM1.13 per share. More than 229.13 million shares were sold during yesterday’s trading session.
In a filing on Bursa Malaysia, Serba Dinamik’s board of directors announced that the company had on May 28, 2021 received a special notice from Datuk Abdul Kadier Sahib, a non-independent non-executive director and a shareholder holding 15.96 per cent of the total issued share capital of the company.
The notice had proposed that the company to convene an extraordinary general meeting (EGM) pursuant to Section 311 of the Companies Act 2016, the proposed removal of KPMG PLT as auditors of the company pursuant to Sections 277 and 322 of the Act and the proposed appointment of BDO PLT as new auditors of the company in place of KPMG PLT for the financial year ending June 30, 2021.
To recap, Serba Dinamik had last week, under a special independent review filing, addressed the matters raised mainly by the external auditors on May 3, 2021 pertaining to the statutory audit.
AmInvestment Bank Bhd (AmInvestment Bank) highlighted that among the issues raised by Serba Dinamik’s external auditor KPMG which led to a decision to appoint a special independent review, these included the group’s inability to verify sales transactions of RM2.3 billion and trade receivables of RM652 million for 11 customers for the period under audit.
“Serba Dinamik has secured cash proceeds of up to 72 per cent as at March 31, 2021 and up to 90 per cent to date from those sales,” the research firm said.
“However, as onsite materials of RM569 million (81 per cent of FY21F net profit) have yet to be confirmed by the auditor, we believe that there may yet be risks for provisions or impairments.”
On local suppliers with minimal share capital of RM100,000 and yet having transaction values of RM60 million–RM96 million stems from being under Petronas’ vendor development programme (VDP), while the same incorporation dates or registered address appear to be the same secretarial services as these players are being advised by Serba Dinamik as a VDP anchor, AmInvestment Bank gathered.
“Inability to contact Bahrain customer and supplier may be due to the sighting of wrong address and misunderstanding of a telecommunication platform.
“Different IT suppliers’ names, registration numbers, addresses and activities in contracts and invoices in contrast to other documents and websites appear to be misreadings by the auditor.
“Also, the supplier’s direct payments to subcontractors are part of tripartite agreements for Serba Dinamik to facilitate foreign currency transactions.”
On Abdul Kadier’s proposal to remove KPMG as the company’s external auditor with the proposal of BDO as the company’s new auditor, Public Investment Bank Bhd (PublicInvest Research) noted that challenges could probably come from the minority shareholders after the Minority Shareholders Watchdog Group (MSWG) urged to vote against the resolution to remove KPMG to allow them to complete its audit and defend its findings, subject to the third-party auditor review, should matters conflict.
“Votes from EPF (10.2 per cent) and KWAP (5.3 per cent) will play an important role,” PublicInvest Research opined.
The research arm gathered that Serba Dinamik had contacted those two shareholders, as well as other shareholders.
“While we appreciate the greater transparency by management on these matters, the removal of the current auditor could raise yet more difficulties for both the independent review and audit progress given the current Covid19 movement restriction which has already delayed the FY12/20 audit process and led to the change in the group’s financial year-end to 18MFY6/2021,” AmInvestment Bank said.