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As a stock, the risk is rather unreal. (Yes, as stated before, no stocks fall forever, sooner or later it will rebound. hence, i am NOT stating that this stock has no chance forever)
Why is the risk unreal? The solvency issue.
Posting #9.
LCL listed as PN17-status firm
By Adeline Paul Raj Published: 2009/12/16
LCL Corp Bhd (7177), the interior fit-out specialist that defaulted on loans as a result of the Dubai debts crisis, has sunk into Practice Note 17 (PN17) status.
"LCL is considered a PN17 company... as the company is unable to provide a solvency declaration to Bursa Securities," it said in a filing with the stock exchange yesterday.
That LCL failed to provide solvency declaration to Bursa Securities, says it all. Which means LCL could anytime be insolvent.
Now... the boss, has no shares left. Yeah, he stated he could stay... but ... how much can anyone trust a ship with a captain that has no longer any vested interest? What if he just walked away?
And then.. that one disposal of asset, the LCL Cushion MBO.
Whatever the main reason for the MBO buyout, now LCL Cushion no longers belongs to LCL, yes? What if this the 'safety route out' for the owner? Not possible?
LCL as an interior designer, is GOOD no doubt. They are good at what they are doing.
However, in this business world, being good doesn't guarantee one anything. The management needs to manage its business risk as well.
And this is where I really think LCL failed as a business. During its peak days, it went gung-ho, all out, in Dubai. Yes, no risk no gain but one needs to consider that LCL should have really understood and manage their business risks.
Some simple risk issues:
they were putting all their eggs in one basket (83% of its business were from Dubai)
collection WAS long (4-8 months as stated back in 2007!)
since collection was long, did it made sense to be so use so much bank borrowings? And worse still, their bank loans were short term in nature.
paying back loans short and collecting back payments long, doesn't make good business sense, does it?
couldn't they see the outright property bubble in Dubai?
Could LCL survive?
It needs help. Major help. A White Knight is really needed.
Out of all the disposals by the boss, ONLY this announcement carried the following remark..
16,000,000 LCL shares ("the Security") personally owned by Dato' Low were pledged to CIMB Islamic Bank Berhad as part of the security in respect of a facility granted to LCL Corporation Berhad. CIMB had invoked its rights under the Memorandum of Deposit to dispose the Security on 11/12/2009.The net proceeds from the disposal of shares was utilised to partially settle the outstanding overdue amount of the Facility granted to LCL Corporation Berhad
So these were the shares that were disposed by CIMB, where the net proceeds used to partially settle outstanding overdue amount.
Which leaves the question... what about ALL the disposals made in November?
Did those proceeds go to setting debts? or did the proceeds went into the boss own pocket?
Dubai may still repay lenders in full, an Abu Dhabi-based newspaper reported on Sunday, citing unnamed sources.
The National daily said two top Dubai officials, on a confidence-building mission to Britain and the United States in recent days, told financial leaders in London that repaying all bank loans in full "was discussed as a medium-term possibility".
"They made clear there were a number of options the government of Dubai saw as feasible and desirable for Dubai World and repayment in full was one of them," the newspaper quoted a person who attended the talks as saying.
But a full repayment seems the most unlikely of available options and bankers expect Dubai World to propose the extension of maturities for at least a year or more while paying interest.
In the boom years, Dubai lured wealthy visitors and courted the media with celebrity-endorsed projects and developments such as The World, an archipelago in the shape of a world map.
But whereas neighbours funded growth with proceeds from soaring oil prices, Dubai borrowed to invest through a network of state-linked conglomerates that offered limited transparency.
Dubai World's troubles have raised question marks about transparency in the region as a whole and fears among investors that other government-linked firms could also face problems.
Speculation has continued to mount over which assets Dubai Inc., the network of government-owned companies, is willing to sell to help pay off its debt obligations.
Luxury hotelier Jumeirah Group, is not for sale, said its owner Dubai Holding, which belongs to Dubai's ruler. - Reuters
0005 GMT [Dow Jones] LCL Corp (7177.KU) may fall to psychological 20 sen vs yesterday's close at 23 sen (+53.3%), says dealer, in knee-jerk reaction to statement to Bursa from troubled interior fit-out firm that lender Royal Bank of Scotland issued notice withdrawing facilities totalling MYR40.2 million to unit LCL Furniture. Dealer notes shares of firm with high exposure to Dubai property market had fallen more than 60% since early November; in December, company says "severely" affected by Dubai turmoil, defaulted on MYR72 million of loans from Affin Bank, Bank Islam. "The stock has recovered somewhat since then on hopes a new large shareholder may emerge after its founder Low Chin Meng lost control but this filing, although not unexpected, will cause some knee-jerk selling," says dealer. Stock likely surged yesterday on keen interest in small caps; drop could be limited as withdrawal of facilities no surprise after December's default. (KPL)
LCL defaults on more loans
Written by The Edge Financial Daily
Monday, 18 January 2010 22:48
KUALA LUMPUR: Financially troubled interior fit-out group (IFO) LCL Corp Bhd has defaulted on more loans from AmBank (M) Bhd totalling some RM2.9 million.
Of the loans from AmBank, RM2.3 million was to its subsidiary LCL Furniture Sdn Bhd while the remaining RM573,249 was to another subsidiary LCL Trading Sdn Bhd, LCL Corp said today.
To date, LCL has defaulted on RM115.2 million worth of loans from Affin Bank Bhd, Bank Islam Malaysia Bhd, The Royal Bank of Scotland Bhd and AmBank.
With the bulk of its projects based in Dubai, the announcement came as no surprise. LCL is the first local mishap from the recent Dubai crisis. Last month it announced its first default early and analysts had expected the company to announce more defaults as it continued to face difficulty in collection. The stock sliped half a sen at yesterday's close to 20 sen.
