Frankly Speaking

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LCL’s fall from graceLCL Corp Bhd took another blow last Wednesday with the appointment of receivers and managers for one of its subsidiaries, LCL Furniture Sdn Bhd. The day before, LCL had announced that it had been designated a PN17 company as it had been unable to provide a solvency declaration to Bursa Malaysia.
And the day before that, eyebrows were raised when the company announced that its founder and chairman Datuk Low Chin Meng had sold 16 million shares, representing an 11.2% stake in LCL, which had been pledged to CIMB Islamic Bank Bhd as part of the security for a facility granted. Effectively, Low lost ownership of the company he founded more than 20 years ago.
LCL was once a darling of the investment community, heavily promoted by brokers Kenanga Investment Bank and CIMB Investment Bank. Its share price rose steadily, reaching close to RM7 per share (before a share split), as business grew. Low himself set a RM1 billion turnover target for 2009.
Expectations were lifted as brokers upped their target prices for LCL to stratospheric levels. Unfortunately, the global financial crisis hit and LCL was affected given its exposure to Dubai and highly geared position.
But even when cracks appeared, for example, when it submitted its FY2008 accounts late in May this year, analysts maintained their optimism. However, certain substantial shareholders started selling their shares in 2H2008.
LCL’s case will probably be studied in financial classes as an example of what happens when a company grows too fast, takes on too much debt and employs inadequate risk management given its high exposure to a single market. The lesson for investors would be to be extremely cautious when the rest are extremely bullish.

Climate enterpriseThe two weeks of squabbling in Copenhagen over who should do what about climate change means that the international community is unlikely to develop a timely unity of purpose that the crisis demands.
Once that unfortunate truth is accepted, it is easier to develop the urgency to see the vast opportunities the crisis offers for other stakeholders to make a difference.
For example, the McKinsey report Pathways to a Low-Carbon Economy (2009) provides an evaluation of the potential and costs of some 200 greenhouse gas abatement opportunities in 10 sectors by 2030.
Realistically, capturing enough of this potential to stay below the 2°C threshold will be highly challenging, the report states. Additionally, all regions and sectors would have to capture close to the full potential for abatement available to them, and even deep emission cuts in some sectors will not be enough.
That said, forward-looking businesses stand to profit from the myriad opportunities for climate change mitigation and adaptation if they avail themselves of the first-mover advantage.
These opportunities range from improving the energy efficiency of vehicles, buildings and industrial equipment, thereby reducing energy consumption; shifting energy supply from fossil fuels to low-carbon alternatives; and halting deforestation, increasing reforestation and changing agricultural practices to increase the carbon-sink effect.
Certainly, it is difficult to believe that the spirit of enterprise that has brought so much progress to the world will remain unequal to the most urgent task that is before it today.

Clients are guilty tooThe swoop by Bank Negara Malaysia on money changers who undertake illegal remittances has produced interesting revelations.
Money changers are not allowed to remit funds. The law on this is clear, and this is why 41 of them have had their licences revoked. Among the money changers affected are the top three names in the business, and one of them with an outlet in KLCC is said to have several influential clients.
This brings us to the more important question: why are money changers sought to remit funds?
Has there been any action taken against those who had supposedly engaged the services of the money changers to remit funds instead of licensed remittance agents or banks? Aren’t these people also flouting the law?
Why have they not used the proper channels to undertake remittances? Is it to ensure that the remittances are not traced back to them? It is known that money changers remit funds without recording the sender’s identity.
Bank Negara had, some time back, lifted all restrictions on the remittance of the ringgit, and it has no reason to impose any now considering the growing international reserves. There are some procedures to follow in the remittance of large amounts of funds, but generally there are no restrictions.
In fact, the central bank has increased the number of licensed remittance agents to facilitate the transfer of funds. So why engage the services of a money changer?So far one menteri besar, the wife of a senior minister and two businessmen — one of whom is a Tan Sri with myriad businesses — have been implicated in illegal remittances. Except for the minister’s wife, the other three have engaged the services of money changers for remittances. The minister’s wife had apparently received funds while she was overseas.
Some of the money changers have denied transferring funds on behalf of the VIPs. Obviously, however, Bank Negara must have had good reasons for revoking their licences. The action should not stop with the money changer, but go all the way to the businessmen and people who have engaged their services.

This article appeared in Corporate page of The Edge Malaysia, Issue 786, Dec 21-27, 2009.