Source	:	HLG
Stock	:	SERBADK		Price Target	:	0.78		Price Call	:	HOLD
				Last Price	:	0.56		Upside/Downside	:	+0.22 (39.29%)

Serba has agreed to hire EY as an independent reviewer to assess the veracity and accuracy of the matters highlighted by its external auditors KPMG. Serba has also appointed 3 independent directors and non-executive directors to the board. We believe this is a positive step forward for Serba as it displays confidence to shareholders. However, we believe that volatility will ensue until the independent audit process is resolved. With share price having fallen and slightly breaking below our TP , we upgrade our call from Sell to HOLD at an unchanged TP of RM0.78 based on 0.7x FY22 BVPS.

NEWSBREAK

Serba has agreed in principle to appoint Ernst & Young (EY) as its independent reviewer to assess the veracity and accuracy of the matters highlighted by external auditors KPMG. The group said an updated announcement will be made upon the finalization of terms and conditions of the said appointment. The group has also announced that it was appointing Datuk Mohamed Ilyas Pakeer Mohamed, Masleena Zaid and Johan Mohamed Ishak to its board as independent and non-executive directors.

HLIB’s VIEW

Positive step to move forward... We believe that the appointment of EY as an independent reviewer is a positive step for Serba due to its credibility as one of the big- 4 accounting firms. The appointment of Masleena Zaid, who is the managing partner of Messrs Masleena, Yee & Partners is also a positive step for Serba as she was previously the head of section at the Companies Commission of Malaysia from July 2008 to December 2009 and prosecuting officer at the Securities Commission between February 2001 and June 2008. We read this move as a signal that Serba is committed to prove that the Company is free from any wrongdoing.

… waiting for clarity. While Serba has shown some positive moves to clear its name, the independent audit will take at least 3 months to complete and we believe that investors would not be ready to jump the gun completely just yet. However, the recent step taken by Serba shows a display of confidence to shareholders. Until the accuracy and veracity of the accounting matters are resolved, we believe that volatility will ensue.

Upgrade to HOLD from SELL at unchanged TP of RM0.78. While Serba has taken positive steps forward with regards to its governance framework, we believe that the stock will remain volatile until its audit matters are resolved. With share price having fallen and slightly breaking below our TP, we upgrade our Sell call to a HOLD at an unchanged TP of RM0.78 based on an unchanged 0.7x FY22 BVPS.