Key takeaways from Serba Dinamik conference call:
♦️ Serba received the official review request in early May this year and this is the main reason for the change of financial year end to June. The prolonged COVID-19 pandemic has somewhat limit the ordinary audit process despite >90% of the subsidiaries/material subsidiaries are audited by KPMG.
♦️ No fraudulent related reports have been raised thus far. The review are not particularly on certain transactions or subsidiaries but more on overall operations which include domestic and overseas operations. Some of these issues have been addressed by management and the independent reviews will “give comfort” to the auditors.
♦️ No RPT is related and the additional reviews are not backdated to prior year numbers. The additional review also not extended to Dato’ Karim’s related companies i.e. KPower and SCIB.
♦️ Serba Dinamik has identified a new independent firm to address this issue and the review is guided to be completed by August concurrently with the conclusion of 18MFY21 financial statements (until October 2021 for submission).
♦️ Management reiterates that no disruption to its business operations at this juncture. They have also engaged with financiers and have not received any pullback of banking facilities and credit lines.
♦️ Our view - the explanations given by management may not be able to provide sufficient clarity and comfort to address investors doubt. Expect share price to react negatively and it will remain a major overhang until the company is able to prove the veracity and accuracy of these matters.
