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PublicInvest Research

Author: PublicInvest   |   Latest post: Mon, 21 Oct 2019, 9:38 AM

 

LONDON BISCUITS BERHAD - Another Round of Defaults

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London Biscuits (LBB) announced that it has defaulted on its payment of principals to Bangkok Bank Berhad (BBB), Alliance Bank Malaysia Berhad (ABMB) and Malaysian Trustees Berhad (MTB). The cumulative amount of the 3 loans is RM168.9m. We are troubled by this development, considering that the group’s outstanding debt as of 30th June 2019 stands at RM359m. Failure to pay the loans on time are due to cash flow constraints, and likely to impede its ability to repay its remaining outstanding debts moving forward. Maintain Trading Sell and TP of RM0.12.

  • Loan defaults are to 1) Bangkok Bank Berhad on 4 July 2019 for RM64.2m, 2) Alliance Bank Malaysia Berhad on 19 August 2019 for RM7.9m and 3) Malaysian Trustees Berhad on 13 August 2019 for RM96.7m.
  • Our take. We are troubled by this development, considering that the group’s outstanding debt as of 30th June 2019 stands at RM359m. With this being the second round of defaults following an earlier RM9.8m, LBB’s failure to pay the loans, which it attributes to cash flow constraints, is likely to severely impede its ability to repay its remaining outstanding debts moving forward. Management is currently engaging with its lenders and intends to submit a comprehensive proposal to restructure its facilities. While LBB could monetize its assets to raise fresh funds given its net asset per share of RM1.28, any revitalization plan to uplift LBB from its PN17 status will need to address its operational viabilities should it go down this route as it may see a possible (and significant) change in its financial and operational makeup.

Source: PublicInvest Research - 23 Sept 2019

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