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Published: Wednesday January 28, 2009 MYT 11:32:00 AM
LCL down 20% on credit tightening woes
KUALA LUMPUR: LCL Corp’s share price fell as much as 20.3% or 10.5 sen to a low of 41 sen in mid-morning on Wednesday on concerns about the impact on its projects in Dubai arising from tightening of credit facilities.
Its share price opened at 51 sen, down 0.5 sen from last Friday’s close. At 11.30am, its share price was down five sen to 46.5 sen. It was the second most active with 4.42 million shares done.
LCL Corp’s Dubai chief executive officer Hakim Asmaun was quoted as saying the group needed government support to weather the global economic slowdown. The current economic slowdown was disrupting the group’s plans as local banks were tightening their credit facilities.
Hakim was also quoted as saying the group needed the Malaysian government’s support and added that five to six big Malaysian companies in Dubai were also affected by the tightening of credit facilities.
CIMB Equities Research said LCL Corp was not alone in facing a liquidity squeeze. Local banks had been under fire recently for pulling credit lines on listed and private companies as they took a cautious view amidst the global slowdown.
“Local banks need to understand that the interior-fit-out (IFO) business remains a viable business in Middle East, even in Dubai.
That said, IFO companies must have established and credible clients who are good paymasters,” it said.
The research house had lowered its target price at RM1.95. It was maintaining its earnings forecasts for now while noting that there is downside to our numbers if there are delays in the announcement of new projects or if the credit squeeze does not ease.
“However, our target price is reduced from RM2.35 to RM1.95 as we widen the discount to the construction sector’s 11 times P/E target from 40% to 50%, in line with WCT’s target valuation. The large discount reflects LCL’s small market cap and worries about the Middle East,” it said.
CIMB Research said LCL remained an outperform on the potential re-rating catalysts of success in landing major IFO contracts in other countries, probably Abu Dhabi or Singapore first; listing of its Dubai operations and trough price-to-earnings and price-to-book value valuations. Furthermore, dividend yields are almost 10%.
Thursday January 29, 2009 LCL sees no potential impact from credit tightening
By EUGENE MAHALINGAM
PETALING JAYA: Interior fit-out (IFO) works provider LCL Corp Bhd, whose shares have been slipping on concerns over funding problems arising from tighter credit facilities, says it sees no potential impact on any of its projects.
The company said its Dubai operations chief operating officer Abdul Hakim Asmaun was misquoted in an earlier report as saying the group needed government support to weather the global economic slowdown.
“Hakim was speaking in his capacity as a member of the Malaysia Business Council and was talking about Malaysian companies in general and not referring to LCL,” chief operations officer Michael Tan said in a statement to StarBiz yesterday.
He added that LCL’s credit facilities were in the form of project financing and were secured during the award stage of the contracts.
“It (the loan) is non-revolving and will be retired gradually towards the last stage of IFO works as the project progresses.
“Therefore, banks tightening their credit facilities is not an issue as the repayment is secured against the assignment of contract proceeds whereby the banks will receive payment directly from the customers,” Tan said.
Yesterday, LCL’s shares fell 5.5 sen, or 11%, to 46 sen, an all-time low.
Currently, about 75% of LCL’s business is derived from Dubai. Tan said the group was looking to diversify into other countries in the Middle East, namely Abu Dhabi, Bahrain and Qatar.
“We strongly believe that these countries are good markets as they have some of the highest oil reserves in the world.
“They also have a very good track record in terms of GDP (gross domestic product) growth in the past five years,” he said.
On the outlook for the IFO business in the Middle East amid the current economic climate, Tan said: “There is no doubt the Middle East is also affected by the global economic situation. However, our projects are still progressing, albeit at a slightly slower pace.
“Even though there is a slowdown in construction, IFO comes in at the very end of a project and we strongly believe that our clients will not forfeit the entire project so close to completion.”
Closer to home, Tan said the group was looking to expand its IFO business into Singapore.
“We are currently actively bidding for projects in Singapore and one of our main targeted projects is the Singapore Marina Bay Sands Integrated Resort.
“With Singapore being so close to home, the mobilisation cost will be much more effective and we can also accommodate our current workforce should downsizing of operations in the Middle East be required,” he said.
Tan said the group was adopting a cautious approach in taking on new projects.
“We are more selective about whom we work with and we are negotiating for better conditions with enhanced payment terms as a measure to mitigate risks,” he said.
LCL currently had an outstanding order book of RM454mil which would last the group another year, Tan said.
30-01-2009: Foreign hands suspected in LCL selldown
by Tony C H Goh
KUALA LUMPUR: The selldown of more than six million shares that pushed LCL Corp Bhd shares to an all-time low of 46 sen on Wednesday, following reports that the company was facing financing problems and turned to the government for assistance, was probably the work of foreign institutional investors.
Foreign shareholdings in the company stood at 13% before the selldown, and some of the largest foreign investors include JP Morgan Co Ltd, NT Assets Co and Morgan Stanley Co Ltd, said LCL chief operating officer Michael Tan.
The selldown by the foreigners is said to be related to a report earlier this week that LCL is seeking government assistance to help overcome tightening credit conditions in implementing its projects in the Middle East. Since then, the company had refuted the report and clarified that its financing for projects was intact and they needed no government assistance.
After clearing the air over its credit lines, LCL's priority is now geared towards managing its borrowing levels besides eyeing new markets in the Middle East and around this region to secure additional contracts
According to Tan, going forward, LCL would also be mindful of the interest of its stakeholders and was working on reducing its gearing levels to ensure a healthy balance sheet.
Tan added that LCL is in the midst of securing new contracts in Abu Dhabi and Singapore's Marina Bay Integrated Resort project worth S$46 million (RM110 million), expected to be finalised by next month.
"In addition, we are also hopeful of securing the Dubai Metro-Green line (the second underground Metro line in Dubai) worth RM600 million, and the Al-Reem Island in Abu Dhabi valued at RM15 million to RM20 million.
"We are also bidding on smaller scale projects, worth about RM5 million to RM10 million locally. In total, we are tendering for more than RM1 billion worth of projects both locally and around this region," Tan told The Edge Financial Daily yesterday.
Tan said LCL is working on reducing its gearing level due to the deferment of its proposed rights issue that was supposed to raise RM70 million and bring its gearing level to below 1.5 times from more than two currently.
"Some of the options that we are exploring is the possibility of foreign equity partnership or strategic alliance with developers and property players based in the Middle East. This is to enable us to secure jobs without incurring high borrowings," he said
LCL, which specialises in the interior-fit out (IFO) industry, had outstanding projects worth about RM1.15 billion as of Nov 8, 2008. Among the ongoing projects that will keep the group busy until the end of the year are the Dubai Metro-Red Line, consisting of 14 stations worth RM312.6 million and a RM33 million contract from Bank Negara Malaysia.
Projects in the Middle East, in particular Dubai, are affected by poor sentiment rather than actual credit issue, so there are still plenty of jobs available in the region, Tan said. He clarified that every project undertaken by the company has its own financiers, and all the funding arrangements were actually finalised in Malaysia.
Clarifying the report citing an LCL official in Dubai stating that they sought government assistance to complete the projects, Tan said that the company official was speaking in his capacity as a member of the Malaysia Business Council, during a dialogue in Dubai about Malaysian companies in general, and was not referring to LCL.
"All the bank borrowings for our projects have been secured, and cooperation from banks is still good, as the company is not facing any problem in securing additional funds to finance its future projects," said Tan.
LCL Corp. Bhd (7177.KU) - Malaysia
4th quarter ended Dec. 31:
Figures are in Ringgit (MYR).
2008 2007
Revenue 115,894,000 103,427,000
Pretax Profit (21,138,000) 5,810,000
Net Profit (17,389,000) 4,777,000
Earnings Per Share (12.15 Sen) 3.34 Sen
Dividend Omitted 10.00 Sen
12 months ended Dec. 31:
Revenue 464,983,000 289,785,000
Pretax Profit 4,171,000 24,195,000
Net Profit 9,346,000 21,440,000
Earnings Per Share 6.53 Sen 14.98 Sen
Dividend Omitted 10.00 Sen
TA cuts LCL to sell, values IFO outfit at 35 sen
Written by Financial Daily
Tuesday, 05 May 2009 11:26
TA Securities views LCL Corp Bhd’s failure to submit its audited financial statements ended Dec 31, 2008 before April 30, 2009 which violated listing requirements as a negative surprise.
The research house, which downgraded LCL to a sell at 57 sen from a buy, now values LCL at 35 sen from 82 sen previously, based on the revised three times CY09 earnings per share. .
The interior fit-out (IFO) company now has less than three months to submit the audited financial statements before Bursa Malaysia suspends the trading of LCL shares. Also, LCL will be delisted if it fails to submit the audited financial statements within six months from now.
TA Securities said LCL’s management attributed this negative surprise to a stock verification issue in Dubai, which has prolonged the audit process.
“We understand that there is no payment issue or any conflicts in the method used to recognise VO (variation order) claims. In 4Q08, LCL reported an increase in inventories of 19% quarter-on-quarter and 38% year-on-year respectively to RM34 million.
“This was nothing unusual given the increased amount of works in Dubai. Hence, we do not expect LCL to take too long to publish its audited financial statement unless a much more complicated issue arises,” TA said in a research report yesterday.
Nevertheless, TA reckoned that LCL would be fined for failure to furnish audited financial statements on time. In the past, Bursa Malaysia has fined various companies from RM2,000 to RM72,000 for late submission of audited accounts.
TA maintained its FY2009-2010 earnings projections given that the fine is expected to be immaterial.
“However, until the audited FY2008 financial statements are being audited, we raise the discount attached to the construction sector (10 times) now from 30% to 70% to factor in the risk of misrepresentation of FY2008 financial performance,” said the research firm.
LCL fell three sen to close at 54.5 sen yesterday.
This article appeared in The Edge Financial Daily, May 5, 2009.
credit tightening woes?