stormillionaire said...
- So what's your view on this Moola?. TA's call or CIMB's outlook? They're night and day.
Hello,
Do understand I am not an investment advisor. Ok?
And I have no idea whether a stock price would go up or down.
What I can do is, I can chat and offer you some flawed views on certain issues.
As it is, for LCL.
Fact it, it's last quarterly earnings it reported massive losses. That is a fact.
It reported its audited earnings late. That is a fact.
It's main cash cow is Dubai. That is a fact.
Dubai home prices has crashed some 41% for the first 3 months of the year. That is a fact. (see Dubai's House Prices Drop 41% In Q1!! )
Would the property crash in Dubai have a huge impact on LCL? Take a look at CIMB's own report (second picture) and figure out how much Dubai means to LCL.
Why is Dubai important?
This is LCL's last reported quarterly earnings: Quarterly rpt on consolidated results for the financial period ended 31/12/2008
It reported net quarterly losses of 17.389 million.
It's main customers, from Dubai, is being hit by a property crash. Needless to say, this would be bad for LCL's business.
Here is a screen shot of their balance sheet taken from the quarterly earnings notes.
1. Inventory is blown up compared to a year ago.
2. Trade receivables is blown up too.
3. Amount due from customers for contracts work is up.
4. Their own cash - depleting.
5. Their borrowings had sky rocketed.
Now, I would wonder.
I always do wonder.
Since their main customers from Dubai is having a property crash, isn't this exactly why the amount due from their customers is sky rocketing? Well I would ass-u-me and guess that LCL's customers is having problem with payment.
And then look at the trade receivables.
Huge amount.
Concern always is if the trade receivables goes bad, the company would have to declare them as bad debts, which means it would have to end up as losses.
Inventory build up is no good either.
Assumption, if the inventory is for renovation work for their customers, then there is a possibility these inventory might not be ok for other customers. Dubai 'used' (can I use this word?) to be a city of extremely high luxury. So there is always a chance that other customers might not want these inventory. (This is called assessing the business risk, yes?)
The last two issues.
Massive concerns.
Depleting cash and the fact that LCL has massive borrowings. Total cash of only 14.3 million versus total group borrowings of 379 million does not sound like a healthy company at all. And when you consider that their main business model (renovation work in Dubai) has a huge question mark hanging over it, then the risk multiplies.
ps: another issue for consideration. LCL had a rights issue proposal all drawn up. But according to an announcement in March, see here, LCL managed to get an extension of this proposal to Aug 2009. I would perhaps ask why the rights issue was postponed. No one interested?
These would be my flawed concerns on this company. Hope this help as a second opinion.
Haha. Thanks for the shoutout, Moolah. Appreciate it.
ReplyDeleteOh,
I wasn't asking for any investment advice.
You posted two differing opinions from TA and CIMB. Surely you would've thought about it and formed your own deductions.
I was merely curious about your views on this.
p.s I understand that you're a Red Devil. We're going to Rome!
LOL! I know but I still have to put in my disclaimer.
ReplyDeleteAnyway, I always attempt to show both side of the fence. ( Sometimes I do fail! )
As it is, I actually did not quite agree with both views.
Which is why I highlighted the concerns in this new posting.
For me I believe the housing problem in Dubai would have a massive impact on LCL.
ps. Oh yes I am MU fansi. :D
Okay good. I wonder if it's gonna be Barca or Chelsea joining us. haha.
ReplyDeleteAnyway, back to business. I guess I can see where you're coming from in regards to your concern with the Dubai housing problem. It's only natural to think that if a co's rice pot is in trouble, where else is the rice going to come from right?
I guess in that respect, TA would have given a more accurate assessment of their position. Between CIMB and TA, one of them have got it terribly wrong I would think.
I could be wrong of course but I sense you're not impressed by TA's conclusion on LCL as they've placed their reasoning for a bleak prospect on LCL becuase of the delayed audited financial statements and did not delve further as you did to point out an even bigger problem, the problem that sits in Dubai.
However, my view is that a delayed audited financial statement would be enough to scare off any seasoned investor or anyone with some financial education. Delays could mean differing views with the auditors. And that can also point to many things, including issues.
My disclaimer: Above opinions are my own and should not be taken as an investment advice in anyway at all. Just sharing my thoughts. :D
Well without the delayed auditor's report, the investor's main concern is the weak balance sheet issue.
ReplyDeleteSo why LCL?
LCL was listed back in 2004.
It turned into one investment gem due to the stellar stock growth.
And the stock soared.
And the main reason was LCL striked gold with the booming property market in Dubai.
Now the property market has gone bust.
And LCL last reported earnings showed losses.
So how would you think I rate LCL's prospects?
ps. I think Chelsea can win tonight.
Yup I agree. Without the delay in the audited fin.statements, there are definitely other things to watch out for.
ReplyDeleteSo yeah, I guess I can see what your conclusion on LCL is.
I hope I can intepret fin.statements and fin.news as insightfully as you in the not too distant future. :)