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PETALING JAYA: LCL Corp Bhd yesterday saw more board changes with five non-executive directors resigning.
In a filing with Bursa Malaysia, the interior fit-out company said Chiam Tau Meng, Datuk Emam Mohd Haniff Emam Mohd Hussain, Datuk Abd Wahab Harun, Tan Sri Abdul Halim Ali and Tan Sri Ahmad Fuzi Abdul Razak had resigned.
The first four also resigned from the audit committee.
On Nov 6, Paul Lim Pang Kiam was appointed chief executive officer after managing director Low Chin Meng was redesignated executive chairman, replacing Datuk Syed Ariff Fadzillah Syed Awalluddin who resigned. Executive director Pang Yew Foh also resigned from his position on the same day.
Four days later, three new non-executive directors were appointed – Chong Kok Keong, John Tong Hock Sen and Leong Choon Meng.
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That the first four also resigned from the AUDIT committee...
By Nigel Foo
From our recent visit, we gather that prospects are still poor in Dubai and collection remains a challenge. We are, therefore, jacking up our FY09 forecast loss from RM13.1m to RM51.1m. LCL is likely to continue bleeding in FY10 and the magnitude of the loss depends on whether collection shows a strong recovery. In view of the likely losses over the next few quarters and the tough conditions in Dubai, we now value the stock at a 60% discount to the construction sector's 1.8x P/BV instead of 50%. This gives us a revised target price of RM0.54, down from RM0.68. LCL remains an UNDERPERFORM with the potential de-rating catalysts being i) continuing collection problems, ii) high net gearing of 3.6x and iii) share sales by major shareholders including Dato' Low who sold close to 12% of the company last week.
0812 GMT [Dow Jones] LCL Corp (7177.KU) down 5.6% at 59 sen in heavy volume; selling pressure mounts as investors react negatively to departure of two board members recently, resignation of five non-executive directors last week. "We read this as a sign of major changes to LCL's management and operations in the coming quarters," says CIMB, dubbing departures as negative surprise. Also, fundamentally, interior fit-out concern fairing poorly due to exposure to Dubai; "prospects are still poor in Dubai and collection remains a challenge," CIMB says. "The board room changes are troubling. Investors have turned jittery over these developments while the company's poor prospects is an added weight," says one dealer. (VGB)
“However, several of the new members appointed have finance background and are believed to be tasked to par down the company’s debt level,” he told StarBiz, noting that for the first three quarters, LCL’s earnings were depressed by its Dubai operations. The company faced low billings because of the doldrum in the Dubai property market, which weakened cash flow to cover interest payments, he said, adding that LCL’s gross debt was about RM400mil.
This month, Low sold down his shares in several transactions to about 18.8% from 30.8% previously, while in October, Tan Sri Abdul Halim Ali and Mohd Akib Abd Rashid disposed of their entire stakes in the open market. A bank-backed research house said the selldown “will deal another blow to investor confidence,” although the collapse of Dubai’s property market in the fourth quarter of last year had hit almost all multinationals and sub-contractors.
LCL’s share price has remained in the doldrum due to the weak sentiment. Yesterday, it closed 5.5 sen lower at 57 sen. Low was overseas and could not be reached for comments.
LCL loses Marina Bay fit-out contract
Written by Financial Daily
Wednesday, 18 November 2009 10:34
KUALA LUMPUR: LCL CORPORATION BHD [] has terminated its S$43.1 million (RM104.7 million) contract at the Marina project in Singapore and has accepted S$1.86 million as the settlement sum from Marina Bay Sands (MBS) Pte Ltd.
In a statement yesterday, LCL said its subsidiary LCL Furniture (S) Pte Ltd (LCLS) had on the previous day inked the settlement agreement with MBS, whereby the parties mutually agreed to the termination of LCLS as the trade contractor for the interior fit-out packages, with retrospective effect from Nov 13.
LCL said the development was due to “inconceivable differences arising from financial commitments with MBS”.
This article appeared in The Edge Financial Daily, November 18, 2009.
By Nigel Foo
Dubai World's announcement of a six-month debt standstill has knock-on effects for LCL which is already facing much difficulty in collecting from its clients in Dubai. With a net gearing of 3.6x, LCL cannot afford further delays in collections. Its share price has halved since end-Oct. Given the worsening conditions in Dubai, we now value the stock at a 75% discount to the construction sector's 1.8x P/BV instead of 60%. This gives us a revised target price of RM0.34, down from RM0.54. LCL is likely to announce continued losses for 3Q this evening. We reiterate our UNDERPERFORM recommendation, with the potential de-rating catalysts being i) worsening newsflow and continuing collection problems in Dubai, ii) LCL's high net gearing and iii) further selldowns by its major shareholders.
LCL Corp. Bhd (7177.KU) - Malaysia
3rd quarter ended Sep. 30:
Figures are in Ringgit (MYR).
2009 2008
Revenue 57,786,000 147,901,000
Pretax Profit (30,167,000) 8,575,000
Net Profit (25,390,000) 9,746,000
Earnings Per Share (17.74 Sen) 6.81 Sen
Dividend Omitted Omitted
9 months ended Sep. 30:
Revenue 243,720,000 349,089,000
Pretax Profit 65,103,000 25,309,000
Net Profit (58,635,000) 26,735,000
Earnings Per Share (40.97 Sen) 18.68 Sen
Dividend Omitted Omitted
LCL posts RM25m net loss in 3Q
Written by Joseph Chin
Monday, 30 November 2009 19:16
KUALA LUMPUR: LCL CORPORATION BHD [] posted net loss of RM25.39 million in the third quarter ended Sept 30, 2009, a stark contrast from the net profit of RM9.74 million a year ago due to continuous costs overrun for the Dubai projects.
The interior out-fit company said on Monday, Nov 30 that revenue fell 61% to RM57.78 million from RM147.9 million a year ago. Loss per share was 17.74 sen compared with earnings per share of 6.81 sen.
LCL also reported its trade receivables amounted to RM221 million while amounts due for contract works from customers totalled RM154 million.
"The (3Q) losses were mainly attributed to the unexpected delay in the project resulting in cost overrun arising from the prolongation of projects," it said.
LCL also said since it was not tendering new projects in Dubai, it had also incurred additional cost in right-sizing its Dubai operations which were workers' compensation, logistics and pre-mature termination of accommodation arrangement.
"The delayed payment from clients also worsen the situation whereby the group need to shoulder additional operational cost and financing cost associated
with project financing facilities procured for the projects," it said.
Compared to the nine-months ended Sept 30, 2008, group revenue fell by 30.2% to RM243.7 million from RM349.1 million previously recorded.
"This is mainly due to the lower progress billing for most of the on-going Dubai projects which are near to completion by 4Q09," it said.
It recorded net loss of RM58.63 million compared with net profit of RM26.73 million.
CIMB Research maintains underperform on LCL Corp
Written by Joseph Chin
Friday, 11 December 2009 11:23
KUALA LUMPUR: CIMB Equities Research is maintaining its underperform recommendation on LCL Corp Bhd after the latter's unit defaulted in payment of RM72 million to two banks.
"Our target price remains 25 sen as we continue to tag to the stock an unchanged 75% discount to our 1.8 times target price/book value for the CONSTRUCTION [] sector. We reiterate our Underperform recommendation," it said in a research note on Friday, Dec 11.
CIMB Research said the latest news was a major de-rating catalyst, along with worsening newsflow and continuing collection problems in Dubai.
The research house said it expected more loan default announcements by LCL in the coming months unless Dubai's financial position turns around for the better soon.
"We believe this is a less likely scenario. Over the next few months, newsflow for LCL is expected to get worse before it gets better," it said.
The research house said it was unfortunate that LCL had reached this stage. The company offered so much potential two to three years back but its operations and balance sheet were hit hard after working conditions in Dubai deteriorated rapidly in the aftermath of the 4Q08 property crash.
It added the challenges were not just hitting LCL but also hitting hard the main contractors in Dubai, including the Korean and Japanese contractors.
LCL Corp Bhd (7177), the interior fit-out specialist that defaulted on loans as a result of the Dubai debt 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.
The company said its board of directors would come up with a plan to improve its financial condition. The debt-ridden company has a year from now to submit the plan to regulators.
LCL has so far defaulted on RM69.4 million worth of loans due to Affin Bank Bhd and RM2.6 million to Bank Islam Malaysia Bhd, as it faces difficulty collecting payments for big jobs it had done in Dubai.
Given the financial developments in Dubai, there is "heightened uncertainty" as to the extent of the debts it can recover from the Dubai segment, it said. Analysts don't think it will be able to recover its payments anytime soon.
"The company may face financing and legal challenges in the near term, including but not limited to, legal proceedings initiated by lenders and trade creditors," LCL said.
The stock was at its most active ever yesterday after CIMB Islamic Bank Bhd force sold 16 million shares belonging to LCL's managing director, Datuk Low Chin Meng.
The shares, which represented his remaining 11.2 per cent stake in the company, had been pledged by Low as security against financing.
LCL's shares rose 8.7 percent to 25 sen on some 41.8 million shares. Two market days earlier, they fallen to a record low of 22 sen.
There was more bad news for LCL yesterday as Bursa Securities publicly reprimanded it for not submitting last year's annual audited accounts on time.
An analyst from a local brokerge said LCL's way out of this financial mess is to get the commitment of banks to lend it more money so that it can undertake new projects that will enable it to pay off debts.
LCL plans to continue operating in Dubai, focusing mainly on debt collection
Thursday December 17, 2009 LCL shares slide to fresh low By YVONNE TAN
Investors concerned firm may fall into deeper financial woes
PETALING JAYA: Shares in LCL Corp Bhd tumbled 32% to a record low of 17 sen yesterday as investors dumped the stock on worries that the company would fall into deeper financial woes.
The company highlighted on Tuesday that it faced a risk of insolvency due to the financial problems in Dubai, where most of its projects are located. “LCL is unable to provide a solvency declaration,” the company had said.
The stock traded between a high of 19.5 sen and a low of 16 sen, before finishing among the day’s most heavily traded counter at 40.7 million shares.
“The company has to undergo some restructuring and it will take some time, but it’s not entirely the end of the road for them,” said Nigel Foo, a CIMB Investment analyst who tracks the stock.
“Having said that, I wouldn’t be too bullish on them right now.” He added that due to uncertainties surrounding the interior-fit company, its share price could “go further down.”
Analysts said it was crucial that banks now sit down with the company to discuss on how to restructure the debts that LCL owed them.
“What LCL needs now is for the banks to give it a chance, throw the company a lifeline so that it has fresh working capital to accept new contracts, pay off debts and move on,” said a research head of a local brokerage.
LCL said Tuesday that arising from the financial developments in Dubai, there was “heightened uncertainty” to the extent of recoverability of LCL’s debts from the Dubai segment.
Due to the tight overall working capital position, the company would also consolidate its financial position and adopt a conservative approach to maximise its “currently limited” resources, LCL told the stock exchange.
LCL also warned that the company could face financing and legal challenges in the near term including legal proceedings initiated by lenders and trade creditors.
The company, once the darling of investors, has hogged the news for all the wrong reasons. It is now sitting on a pile of net debt of some RM376mil while its net gearing is 4.7 times.
It has defaulted on some RM72mil in loans to Affin Bank Bhd and Bank Islam Malaysia Bhd and risks further defaults even as the declining property sector in Dubai causes delays and, in some cases, non-payment of its receivables.
LCL has also borrowed from AMMB Holdings Bhd, Alliance Bank Malaysia Bhd, Bank Muamalat Malaysia Bhd, EON Capital Bhd, Public Bank Bhd, Standard Chartered Plc, Kuwait Finance House and Royal Bank of Scotland plc to fund working capital for its Dubai projects.
Earlier this month, state investment arm Dubai World jolted markets around the world when it said it was in talks with creditors to restructure US$26bil of debt built up during the emirate’s real estate boom which started in 2003.
LCL was one of the local firms which leveraged on the boom, securing major projects in Dubai’s multi-million dollar Palm Jumeirah development, the Dubai Metro urban transport system and the Dubai Marina Hotel.
As for Abu Dhabi’s US$10bil (RM34bil) lifeline to cash-strapped Dubai World, this is not expected to have any impact on LCL.
“They (LCL) are a sub-contractor, so there are many people to be paid first. The money is unlikely to trickle down to LCL,” said CIMB’s Foo.
Separately, LCL told Bursa yesterday that Affin Bank has appointed Datuk Mohd Anwar Yahya and Lim San Peen joint receivers and managers for its subsidiary LCL Furniture Sdn Bhd. LCL Furniture has defaulted on payments due to Affin totalling RM69.4mil.
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LCL falls further as receiver appointed
Published: 2009/12/17
LCL Corp Bhd, a Malaysian interior design company, fell to a record low in Kuala Lumpur trading after a receiver was appointed for its furniture unit and the company was placed on the stock exchange’s watchlist of financially ailing companies.
The stock fell 5.9 per cent to 16 sen at 9:04 am local time, following yesterday’s 32 per cent drop. -- Bloomberg
