WITH the accounting saga related to Serba Dinamik Holdings Bhd remaining unresolved, it is no surprise that the company’s share price remains depressed.
But one company associated with Serba Dinamik is seeking to distance itself from the latter.
Sarawak Consolidated Industries Bhd (SCIB) is linked to Serba Dinamik via the fact that Datuk Mohd Abdul Karim Abdullah is a non-independent, non-executive director of SCIB and remains as its single largest shareholder with a 37% stake.
Abdul Karim is the founder and largest shareholder of Serba Dinamik which was listed on Bursa Malaysia in early 2017. He bought into SCIB in 2019.
When the accounting issue at Serba Dinamik first surfaced in May this year, its stock price nose-dived, so did the share price of SCIB.
At Thursday’s close, SCIB shares were trading at 66.5 sen from a high of RM2.50 a piece in February this year.
SCIB chief executive officer Rosland Othman explains that Serba Dinamik and SCIB are two different entities in distinct industries.
“The issues concerning Serba Dinamik have nothing to do with SCIB. We are in the construction business while Serba Dinamik is in oil and gas. We have almost no financial risk with regard to Serba Dinamik,” he tells StarBizWeek.
He says Abdul Karim is not involved in the day-to-day management of SCIB. The company has the ability to secure local contracts without Abdul Karim’s help, he adds.
But Rosland explains that Abdul Karim has had some contribution to SCIB since becoming a shareholder.
“We drew a lot of knowledge and expertise from him as well as established some networking through him. He has helped us to secure international contracts through his network,” he says.
It should be noted though that when Abdul Karim triggered a mandatory general offer for more shares in SCIB back in 2019, Rosland was a person acting in concert with Karim. Rosland then held a 3.12% stake in SCIB.
Subsequently, Rosland increased his stake in SCIB to 7.4% in April this year.
After Serba Dinamik’s auditing dispute surfaced on May 25, and SCIB’s stock price tumbled, Rosland was subject to “forced-selling” by financial institutions.
This has left him with a 3.24% stake in SCIB, after selling around 20.4mil shares.
Rosland became poorer by over RM27mil after the force-selling of the shares.
“This was a double whammy on my side,” he says.
Despite the ongoing Serba Dinamik-KPMG audit saga, Rosland intends to buy back more shares in SCIB.
“It is my aspiration to increase my shareholding in the company because I believe SCIB has immense potential given its management capabilities.
“I am in talks with financial institutions for funding to acquire shares in SCIB. This is also a good time as its price is cheaper compared with the high price I paid previously,” he says.
Rosland looks to raise his stake to above 5%.
Resignation of auditor
Just this week though, SCIB said it received notice that KPMG resigned as its auditor.
In its filing with the stock exchange, SCIB said it is “seeking legal advice regarding recent events surrounding KPMG that has caused adverse speculation against SCIB. This is in light of a perception that SCIB shares similarities to that of another public listed company, which is currently in litigation with KPMG”.
Presumably, that other public listed company is Serba Dinamik.
Rosland says that KPMG resigned willingly because of concerns of acting independently in view of the litigation between them and Serba Dinamik.
In the filing, SCIB had said: “Concerns were raised by SCIB as to whether KPMG is able to continue acting independently in their capacity as auditor consonant with Rule 400.5 of the Malaysian Institute of Accountants By-Laws (on professional ethics and conduct).
Following this, KPMG has stated that the views and opinions of SCIB on KPMG’s independence, coupled with the potential of a claim by SCIB, has compromised KPMG’s ability to continue to independently discharge their professional duties as auditor SCIB. In the circumstances, KPMG is constrained to give notice of their resignation as auditor of SCIB”.
SCIB is in the process of finding a new auditor.
All of that notwithstanding, Rosland remains positive on the prospects of SCIB, citing some major wins.
In the first half of this year, SCIB won local and international projects worth RM840mil and US$330mil (RM1.4bil) respectively.
Among the local jobs that it had won are a joint venture with Sasoakai Resources Sdn Bhd for the maintenance of roadworks in Terengganu valued at RM138.5mil and RM120mil housing project from Malaysia People’s Housing Programme. For the housing project, the group is waiting for the approval from the government to commence construction work which has stalled due to lockdown restrictions. Work was initially expected to start last month.
Rosland says SCIB is in talks to secure three more contracts worth over RM300mil. These include the construction of a hospital in Johor, civil works for Tenaga Nasional Bhd and a road maintenance project in Sarawak.
The group’s current order book stands at RM2.6bil.
“Under the current circumstances, we are happy with the projects we have secured for now. Despite the lockdown and movement control order restrictions, we are still able to secure projects in the country,” notes Rosland.
However, the projects bagged were initially planned to be funded via a private placement announced in early May to raise up to RM227.8mil.
The private placement has been put on the backburner due to SCIB’s low share price.
SCIB has until November to finalise the private placement.
“I am talking to a few investors but many are requesting for discounts beyond the level that was committed initially, so that’s why it is challenging,” says Rosland.
Nonetheless, he adds that the group is not entirely dependent on private placements to raise funds.
“Our gearing level is low and as such, we can go to the banks to obtain funding,” Rosland says.
Earlier this year, SCIB had announced a plan to double its market capitalisation.
Interestingly, that comment came from Abdul Karim, speaking to the media about the prospects of SCIB.
Commenting on that plan, Rosland reveals it could be “tough” to achieve as the group continues to deal with cautious sentiment on SCIB, stemming in turn from the audit disputes at Serba Dinamik.
In addition, in the upcoming quarters, Rosland foresees SCIB’s earnings to be impacted by lockdown restrictions.
“Our revenue and profitability will be impacted, but we can’t confirm by how much until our audit is completed in October this year,” he says.
Rosland says the group will continue to focus on securing more projects and complete its audit in time. He reckons achieving that would put to rest the negative perception that SCIB faces in the market.