Friday, August 07, 2009

Megasteel And Lion Corp And Lion Diversified

Posted yesterday: How Deep A Trouble Is Megasteel In?

  • Megasteel, a steel mill owned by Lion Corp, part of the Lion Group, failed to meet payment on the loans as the weaker global economy hurt the company’s financial performance.
Let's have a look at Lion Corp.

From Lion Corp last reported earnings:
Quarterly rpt on consolidated results for the financial period ended 31/3/2009

Its financial costs are rather high at 125 million per quarter! Losses for the quarter is more than 540 million!

Cash balances is at 141 million.

Now look at the size of their loans! 4.19 Billion!!!!!!!!

Now surely Houston this is a problem!

And it was really mind boggling about their planned Vietnam project which is estimated at USD9.8 billion or some 34 billion ringgit!!!

How could they ever afford such a massive project?

Now we have Megasteel in default of loan payment.

Now this is not all.

If one reads the earnings notes, we will see the following.

  • A wholly-owned subsidiary of the Company, Limpahjaya Sdn Bhd, has disposed of 66,666,667 ordinary shares of RM1.00 each in Megasteel Sdn Bhd ("Megasteel"), representing approximately 11.1% of the existing issued and paid-up share capital of Megasteel to Lion Diversified Holdings Berhad for a cash consideration of RM100,000,000.


Brilliant move by Lion Corp eh?

They managed to sell 11.1% of their shares in Megasteel to its left hand (or is it right hand) Lion Diversified.

Did the earnings note say 100,000,000?

Lots of zeroes there yo!

My that looks like 100 million!!! And so much moolah for a mere 11.1% stake?!


How much is this Megasteel worth????

Any math experts here?

Anyway, so how is Lion Diversifed doing?

Here is their last earnings note: Quarterly rpt on consolidated results for the financial period ended 31/3/2009

They lost some 296 million!

Now I had posted on Lion Diversified earnings before. This was my last update in Feb 2009. Comments On Lion Diversified Earnings

I had focused on three issues. Cash, Receivables and Loans.

Let's do a comparison. I will re-paste these 3 points and I will add in how they did in May in green bold font.

  • 1. Cash balances increased to 302.428 million from 176.745 million three months ago. And if you look at the cash flow, the cash balance increased thanks to the fact that some 327 million was raised from the issuance of ICULS. Could you imagine the cash balances if this 327 million wasn't there?

Cash decreased from 302 million to just 143.364 million. Cash flow showed purchase of associate/subsidiary. LOL! Hello Megasteel!!!! ( How handy was that ICUL sale!!!!)

  • 2. Trade receivables exploded to 683.976 million! Three months ago it was only 511.587 million.(what on earth is happening??????)

Receivables is now at 452.217 million. Improvement.

  • 3. Total loans is now 1.001 Billion versus 986.542 million reported in its previous quarterly earnings!

Loans decreased to 952.377 million. ( So much loans and yet Lion D decided to buy a stake in Megasteel for 100 million!!! oO)


If you are a Lion Diversified shareholder, are you happy with Lion Diversified buying a 11.1% in Megasteel only to read that Megasteel is now in default of its loans?

( Ah.. if really interested in some older stuff, look at this posting back in 2006: Lion Deal So Good? )