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Serba Dinamik bogged down

PETALING JAYA: Serba Dinamik Holdings Bhd was hit by a slew of downgrades after the company announced its external auditors had questions over its financial accounts.

The integrated engineering solutions provider’s stock was suspended pending an announcement yesterday but shares of the companies where Serba Dinamik group managing director and chief executive officer Datuk Mohd Abdul Karim Abdullah is a substantial shareholder of, saw heavy selling pressure.

The companies, KPower Bhd and Sarawak Consolidated Industries Bhd saw their stocks finish trading 14% and 18% lower to RM1.45 and 1.22 respectively, in a broader market that ended 1% higher.

KPower went on to distant itself from Serba Dinamik stating that the two were distinct and separate entities which ran independently of each other.

Following a conference call between the company’s management and analysts on Wednesday, a string of reports came out yesterday, painting a less than rosy picture for Serba Dinamik and warning investors that price appreciation of the stock may be curtailed for now, pending more clarification on the matter.

On Tuesday, the company which provides integrated engineering solutions to many industries including the oil and gas, petrochemical and power generation industries told Bursa Malaysia that its board of directors was informed by external auditors on “some matters pertaining to statutory audit.”

Consequently, Serba Dinamik – which has long been a darling of investors known for its steady increases in earnings even in tough times – said it was appointing an independent firm for a special independent review to assess the veracity and accuracy of the matters.

Meanwhile, AmInvestment Bank’s research unit said it was downgrading Serba Dinamik from “buy” to “sell” with a lowered fair value of RM1.26 per share from an earlier RM2.40 per share.

The group’s private placement of 337 million shares at RM1.51 per share in January this year is expected to cut net gearing to 69% from 95%, AmInvestment said.

“Even so, this could still be high as management plans to invest into new information communication technology, data centres and telecommunication sectors.

“In our view, Serba Dinamik’s valuations appear precarious pending the outcome of the special audit, ” it told its clients in a report yesterday.

Kenanga Research which downgraded the company to “underperform” from “outperform” said the emergence of this issue had created uncertainties over the reported financial statements.

“As such, we recommend investors to avoid the name for the time being, and wait for further announcements as the situation develops, ” said Kenanga.

Citi Research said the development at Serba Dinamik may serve as an overhang until the independent reviewer is able to verify the veracity and accuracy of the audit matters.

“Fundamentally, there is no change nor disruption to the group’s ongoing businesses at this juncture, ” Citi said yesterday, keeping its “buy” rating on the company.

RHB Research, meanwhile, joined the others in downgrading Serba Dinamik to “neutral” from “buy”.

“The request for a special independent review is a surprise, and we expect the share price to react negatively, creating a short-term overhang until Serba Dinamik is able to prove the veracity and accuracy of these matters.”

Serba Dinamik was last traded at RM1.61 per share, valuing the company at just over RM6bil.

The stock has traded between RM1.49 and RM2.09 over the past 52 weeks.


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