Serba Dinamik given till July 2 to appoint independent reviewer

by PRIYA VASU / pic by TMR FILE

SERBA Dinamik Holdings Bhd plan to appoint Ernst & Young Consulting Sdn Bhd (E&Y) as its independent reviewer to assess the veracity and accuracy of the matters highlighted by the company’s former external auditor, KPMG Ltd, has yet to materialise due to stipulations set by E&Y.

The resignation of KPMG following the legal action taken against it by Serba Dinamik has complicated the matter of appointment of E&Y to undertake the special independent review (SIR).

This comes as the Bursa Securities set a deadline of July 2 for Serba Dinamik to appoint an independent reviewer with the necessary capacity, experience and network to undertake the SIR.

In a filing to Bursa Malaysia yesterday, Serba Dinamik stated E&Y informed the board it can act as the independent reviewer — provided as agreed from the onset — it can perform independently and objectively for the benefits of all stakeholders.

This includes E&Y having full and unfettered access to its KPMG for information and confirmation for the purpose of analysing the transactions and concerns highlighted.

“The engagement to be reporting to independent board members of the company, and no changes to scope of the engagement as previously agreed with the independent directors and Bursa Malaysia,” were among four conditions laid out by EY, Serba Dinamik stated in its filing yesterday.

Bursa Securities yesterday issued a directive to Serba Dinamik to allow the appointed accounting firm to report directly to Bursa Malaysia and the Securities Commission Malaysia periodically on the progress and findings upon completion of the SIR.

Serba Dinamik’s board has in principle agreed to the requirements of E&Y, in order to ensure the engagement can be performed in an independent and objective manner, for the benefit of all stakeholders, the company’s filing stated.

The E&Y appointment now depends on the cooperation of KPMG, which includes co-operation in the form of access and information to be provided to E&Y for the purpose of understanding the alleged irregularities and anomalies identified by KPMG’s audit exercise.

Meanwhile, Serba Dinamik’s third-largest shareholder Employee Provident Fund continued to reduce its shareholding in the company by selling some two million shares on June 23 to take its holdings down to 281 million shares or 7.58%, an exchange filing yesterday revealed.

Serba Dinamik shares remained under selling pressure yesterday, falling some 8.5 sen or 20.7% to a fresh low of 32.5 sen at close.

The retirement fund told Bloomberg it views the appointment of the independent reviewer as crucial to urgently undertake the SIR and address the accounting issues raised by KPMG.

The move by Serba Dinamik to take legal action against KPMG has also prompted the resignation of four independent and non-EDs at Serba Dinamik last Friday.

Datuk Seri Tengku Hasmuddin Tengku Othman, Hasman Yusri Yusoff, Sharifah Irina Syed Ahmad Radzi and Rozilawati Basir had unanimously disagreed with the decision of the board.

“While Serba Dinamik’s management has reiterated that business is as usual despite the ongoing statutory audit issues, concerns over corporate governance-related issues may continue to cloud until this issue is addressed convincingly.

Recent resignation of its external auditor, KPMG, is understandable given the lawsuit against it. Resignation of its independent directors due to differences in opinion is troubling however,” PublicInvest Research analyst Nurzulaikha Aza noted in a report yesterday.

The investment bank revised its valuation methodology for Serba Dinamik by pegging a discount of 50% to its December 2020 book value (trailing financial year 2020 period) of 88 sen, hence, deriving a new target price of 44 sen.

“Recent share price weakness may continue to persist in light of ongoing concerns. We continue to suggest investors remain sidelined at this juncture despite relative attractiveness from a forward-earnings standpoint,” Nurzulaikha wrote.