By Wednesday 2 June 2021, shares of Serba Dinamik Holdings Bhd had lost about 46 per cent of their value in a single week. Then the company’s biggest institutional backers started talking.
The trouble began when auditor KPMG said it could not verify contracts and transactions totalling RM3.5 billion (S$1.12 billion) with 11 customers, according to Reuters. Malaysia’s Securities Commission opened an investigation. Serba Dinamik, an oil and gas services firm, rejected the concerns, said the contracts were sound and promised to appoint an independent firm to review the issues.
Permodalan Nasional Bhd (PNB), the country’s largest fund manager and Serba Dinamik’s fifth-biggest shareholder, was not reassured. “PNB has informed the Serba Dinamik board of directors of the firm’s deep concern about recent developments,” it said in an e-mailed statement to Reuters. It saw no merit in removing the auditor before the annual audit was done and reserved the right to vote against any resolution to replace KPMG. The Employees Provident Fund (EPF) also voiced concern over the accounting issues.
A shareholder changes course
The auditor had its own critics in the boardroom. Datuk Abdul Kadier Sahib, the second-largest shareholder with a 15.96% stake and a seat on the audit committee, wanted an extraordinary general meeting to remove KPMG and bring in BDO. On 2 June, Serba Dinamik announced that he had changed his mind.
KPMG itself said little. It told Reuters it remained in communication with the company and declined to say more, citing ongoing investigations and client confidentiality. The queries it had raised involved sales transactions of RM2.32 billion, trade receivables of RM652 million and material on site balances of RM569 million.
Pension fund KWAP trimmed its holding, selling 26.03 million shares, or 0.7%, according to a Bursa Malaysia filing. On 3 June the stock bounced as much as 7.88% to 89 sen before selling pressure pulled it back to 84 sen. It was the most actively traded counter that morning, with 161.47 million shares changing hands.
The board loses its independents
The pressure did not ease. Late in June, Serba Dinamik told Bursa that independent non-executive directors Rozilawati Basir, Sharifah Irina Syed Ahmad Radzi, Datuk Seri Tengku Hasmuddin Tengku Othman and Hasman Yusri Yusoff had resigned over a disagreement with its decision to sue KPMG. Masleena Zaid, appointed only on 11 June, also left, citing “personal commitment.”
On 28 June the shares dropped as much as 21.95% to a record low of 32 sen. Serba Dinamik was worth about RM1.32 billion by then. On 25 May it had been worth around RM5.97 billion, at RM1.61 a share.
Hong Leong Investment Bank analyst Low Jin Wu cut the stock from “hold” to “sell” with a target price of 28 sen, down from 78 sen. In his view, “buying interest is unlikely to resurface until its audit issues are resolved.” TA Securities analyst Kylie Chan Sze Zan also lowered her target to 28 sen, from RM1.
Sources
- Serba Dinamik shareholder PNB has 'deep concern' after audit issues raised
- Serba Dinamik’s “eagerness” to boot out auditor
- Serba Dinamik plunges to new all-time low as investors weigh directors’ resignation over KPMG lawsuit disagreement
