LCL scouting for white knights

LCL Corporation Bhd, which fell from grace after the Dubai financial crisis, is scouting for white knights to salvage the company, its executive chairman Datuk Low Chin Meng said yesterday.

He said LCL had not found anyone suitable but had not given up on finding a “saviour” for the company, adding that the white knight needed to be “financially sizeable” because of its huge debt problems.

Analysts concurred, saying that it would be tough for LCL to find a way out of the mess because it was deep in debt due to its over-exposure to the Dubai property market.

The company, which was the top local interior fit-out company before the Dubai crisis struck last year, may still be able to capitalise on its branding, but that advantage alone may not be enough.

Seated at a roundtable after LCL’s AGM in a small hotel here yesterday, six of its sombre-looking directors spoke cautiously and softly to journalists from four news organisations.

Asked of “what lesson the company had learnt from the crisis”, Low was at first taken aback.

“What the company (has) learnt, I think, we have explained before in all our announcements. As I said, in our industry, to take projects or to work in Dubai is not wrong because there are no other countries, no other places (which) can offer us that kind of good projects with a reasonable volume,” he said.

“But the only thing is that when things in Dubai go so well, (it was) unexpected that it would turn sour so fast. So we are caught in that manner. That things turned sour in a very short time.”

An analyst with a local research house said about 80% of its revenues came from Dubai before the bubble burst, and that the company had over borrowed to fund its working capital needs in the Middle East.

LCL was the top local player before it aggressively entered the Dubai market. Dubai’s subsequent property bubble bust made it the biggest Malaysian casualty, affecting not only LCL’s fortunes but those of Low, who founded the company and now lost it.

A glance through the December 2009 annual report highlighted an interesting revelation.

None of the directors, including Low, held a single share in the company.

Low’s interest in LCL was sold down completely in December 2009 after CIMB Group Nominees (Tempatan) Sdn Bhd disposed of 16 million shares, or an 11.2% stake, pledged to CIMB Islamic Bank Bhd as part of the security for a facility granted to LCL. In 2009, Low disposed of a total of 41.805 million LCL shares.

LCL has appointed Messrs UHY to undertake a special review of its trade receivables and contracts of work-in-progress. This follows the company’s announcement of a large net loss of RM334.72 million in 4Q09. In 1Q10, the company posted a further net loss of RM130.79 million.

During the good times in 2007, the stock reached a high of RM3.85. The stock counter ended yesterday at 12 sen, near its all-time low of 10.5 sen. For LCL, the Dubai adventure had turned into a nightmare, which continues to play out as the company faces claims from its bankers.


This article appeared in The Edge Financial Daily, July 1, 2010.