KUALA LUMPUR (Sept 23): Investors had associated Globetronics Technology Bhd (KL:GTRONIC) with the fate of Serba Dinamik Holdings Bhd following its auditor's resignation, which sent its stock tanking, erasing 38% of the company's market value in the past one month, according to executive chairman Kent Liaw Way Gian.

The cessation of institutional funds as substantial shareholders in Globetronics were "understandable" following the company's guidance of lower dividend ahead, but the market selldown was sharper than expected, Liaw told The Edge. 

“One of the reasons for the shares’ sharp selldown is that investors associated us with Serba Dinamik due to KPMG's resignation [as the companies' external auditor], which is not the same but [this had] exacerbated the selling,” Liaw, who is also executive director of APB, told The Edge after APB's annual general meeting here.

Once the darling of the local stock market, oil and gas services provider Serba Dinamik ran into controversy in May 2021 when KPMG, its external auditor then, flagged audit discrepancies in its books involving transactions and receivables that amounted to at least RM3.5 billion, which led to investigations by the authorities and several executives being arrested and charged for providing false information in its financial statements. 

The saga, which saw KPMG resigning from its post, culminated in the delisting of Serba Dinamik's shares in June this year after the loss-making company failed to submit its plan to regularise its Practice Note 17 condition for financially-distressed companies.

Globetronics, meanwhile, has lost RM290 million in market capitalisation in the past month after its auditor's resignation on Sept 10. On the same day, the Employees Provident Fund (EPF) and Lembaga Tabung Haji's shareholding dropped below 5% after years as the company's substantial shareholders.

This led its new 10.37%-substantial shareholder, Bursa-listed APB Resources Bhd (KL:APB), to suffer over RM90 million in paper loss, based on the 70 million Globetronics shares it bought at RM2 in February this year, which was above market price at the time.

Globetronics rebounded on Monday, rising eight sen to close at 69 sen per share, for a market capitalisation of RM466.01 million. The counter is down 57% since the start of the year.

Globetronics, Liaw said, had been frank to the institutional funds about the company’s need to enter a new capital expenditure cycle which might affect dividend-paying capabilities.

In the last five years, Globetronics’ dividend payout ratio ranged from 88.3% to 112.3%, while its total net cash had consistently stayed above the RM140 million mark (see chart).

For the next two to three years, the company has earmarked a total RM120 million for capital expenditure, where RM70 million will be spent to upgrade its technology and production facilities, Liaw said.

Both Liaw and Globetronics’ executive director Alan Kang Wei Luen said the company’s operations are currently sound.

Globetronics will focus on its strategic realignment to provide relevant and transformative solutions in a constantly evolving business environment, they said.When asked when the new lines will start to contribute to Globetronics' earnings, Liaw pointed to post-2025, and briefly mentioned that potential new orders and clients are positive on the expansion, without divulging more details.

On APB’s operations, Kang said the core fabrications business is anticipated to deliver satisfactory results with revenue scaling new highs. 

That said, APB will still focus on its strategic investment, the 10.37%-owned Globetronics, which it invested in February 2024 as part of its diversification plan, Kang added.

Kang added that should Globetronics’ share price continue to drop and become undervalued, APB will consider raising its stakes in the company.

APB acquired its 70 million shares in Globetronics for RM140 million or RM2 per share back in February. This was already a premium to the RM1.50 trading range of Globetronics shares at the time.

APB’s current paper loss on Globetronics is north of RM90 million. At the lowest point, the losses reached as much as RM102.9 million on Sept 17.  

Other than Globetronics and APB, both Liaw and Kang also sit together on the board of Sarawak Consolidated Industries Bhd (KL:SCIB) and Artroniq Bhd (KL:ARTRONIQ).

In mid-January, a period widely associated with the unwinding of warehousing activities in Bursa, shares in the four companies were met with heavy selling and saw large volatility in their share prices. This incident has affected investor perceptions of the companies ever since.

Based on Monday’s closing, APB's market capitalisation (cap) stood at RM62 million and was down 78.6% year-to-date (YTD), while SCIB and Artroniq were down 72.7% and 91.3%, with market cap of RM171.3 million and RM28.6 million respectively.