More Comments On LCL

Got the following comments on the posting Quick Look At LCL's Earnings

• dennisctp said...
  the reduce in trade receivables and debts might also influenced by currency. maybe these figures went down just because of currency (RM is stronger) not that LCL really get paid and pay for the debts...

dennisctp,

Many thanks for your comments.

Oh, the trade receivables could go down because of currency fluctuation. Me? I choose not to speculate how and why the receivables were down. I rather note it as it is.

And as it is, there's just too many concerns in this company.

I would be more worried of the cash position of a mere 12.59 million versus a debt position of 391 million. Is this a healthy position?

The following was from LCL's cash flow statement.


One has to consider how healthy LCL is with a cash balance of a mere 12.59 when LCL paid out some 18.748 million per quarter for its Financial Cost.

And more of a concern too there were several disposal of properties mentioned.



Given LCL's current financial position, some would be curious. Why the disposal?

Yesterday Star Business had an article. Malaysian construction firms in Dubai have minimum exposure‎

• Interior fit-out (IFO) company LCL Corp Bhd founder and executive chairman Datuk Low Chin Meng said payments were generally slow in Dubai.
  
  “We will shift our focus on interior fit-out (IFO) contracts in cash-rich Abu Dhabi, after the completion of projects in Dubai,” he said.
  
  The company has projects such as Atlantis The Palm Hotel, Dubai Metro System, Dubai Mall and Dubai Marina Hotel.
  
  Concern over the level of debt held by the Government and its affiliated companies had sent jitters throughout the Gulf region and had affected investors confidence level.
  
  Earlier in the year the Dubai’s stock market was down 60% and many residents believed that the property market was on the brink of collapse.
  
  Dubai had borrowed billions to finance its infrastructure and construction companies such as Dubai World, and Emirates Airline.
  
  A local property analyst said Dubai was likely to be on the road to recovery.
  
  “The worst is likely over as the market has bottomed out. The economy was very bad at the start of the year. The housing market fell into a slump and property prices fell as much as 50% even in prime location and many expatriates left the place,” he said.

Past posting on Dubai's property woes were highlighted in this clickable link.

So payment from Dubai 'were' generally slow. LCL receivables are now separated into three entries. As per its earnings notes last night:

1. Trade receivables - 221.436 million
2. Amount due from customers for contract works - 154.107 million
3. Amount due from related companies - 41.641 million

Assuming and having faith that all these receivables are in order, I would be concerned which of these figures are from its work done in Dubai.

As the sum is rather substantial and with Dubai World current debt issue, surely one has to ask if the debts cannot be collected. And if they cannot be collected, these debts would have to be re-classified as bad debts, which would equate to losses.

And last but not least, given LCL's current financial position, can LCL afford any more delay in its collection of debts?

How?

past postings on LCL here