Business

Tuesday November 17, 2009

What’s up with LCL Corp?

By YEOW POOI LING


Changes in directors coupled with selldown indicate shakeup

PETALING JAYA: The recent board changes in LCL Corp Bhd, coupled with the selldown of shares by several of its board members, seem to indicate a confidence shakeup in the interior fit-out company.

A local broker said the changes “painted a negative picture” as some of the individuals who left were involved in the daily operations.

“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.

“LCL has to focus on reducing its debt level by trying to increase collection from its clients. Capital fund-raising exercises like rights issue are unlikely to be effective, given that the estimated proceeds may not reduce loans significantly,” the broker added.

LCL saw the resignation of Michael Tan as chief operating officer in October, and this month had seven resignations among its board members. Four new board members were appointed while Datuk Low Chin Meng was redesignated to executive chairman from managing director previously, and Paul Lim was appointed as chief executive officer (see table).

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.

It noted that Dubai was showing signs of recovery in the third quarter of this year based on Britain-based real estate consultancy Colliers International, which attributed the higher property prices to increased availability of mortgage financing and a perceived increase in job security among expatriate workers.

“Even if Dubai’s property market shows signs of bottoming out in the fourth quarter, this might not translate into earnings recovery for LCL. Further losses in the coming quarters would lead to higher net gearing, which was already at a demanding 3.6 times as of end-June,” the research house said.

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 : [Stock Watch] [News]


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