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Friday, January 11, 2008

LCL bidding for XL jobs in Dubai

PETALING JAYA: Interior fit-out (IFO) group LCL Corp Bhd is bidding for extra large, or XL-sized jobs, worth hundreds of millions of ringgit each in Dubai.

Its success in the tenders would take LCL to yet another level, as the company has moved up to jobs amounting to RM100mil each currently compared with contracts valued at RM20mil to RM30mil a few years ago.

LCL told Bursa Malaysia on Wednesday that LCL Interiors Contracting LLC had received a letter of award from main contractor, Arabtec Construction LLC, to carry out IFO works worth RM145mil for Tiara United Tower in Dubai.

A 49%-owned associate company, LCL Interiors is based in the United Arab Emirates (UAE) where Arabtec, a large construction group, is also based. Arabtec, with joint-venture partners, is constructing the Burj Dubai, slated to be the tallest building in the world.

Although IFO jobs of RM100mil were considered big in South-East Asia, they were viewed as small in Dubai, LCL managing director Low Chin Meng told StarBiz in a telephone interview from Dubai on Wednesday.

LCL has submitted bids for huge IFO jobs ranging from RM400mil to RM600mil each, which the company is hopeful of securing. As IFO works typically form about 30% of a commercial building's total project cost, the jobs tendered for would involve buildings that cost about RM1.5bil to develop.

“This is a very exciting year for LCL. Management is working very hard,” Low said just before he returned to Malaysia.

On the contract announced on Wednesday, Low said the stock (market) had “expectations of new projects. We're meeting those expectations.”

In the announcement, LCL said the payment terms included “an initial advance payment of 25%,'' which works out to about RM36mil. It is expected to be paid within a month.

“It is only in this part of the world that the main contractor is willing to advance 25% to you. It's due to demand (for IFO services) being greater than supply here,” Low said.

LCL has said before that it is working towards an order book of RM1bil in the Middle East. “That's the path we're taking,” Low said, “but if we take on RM1bil of projects, we would need a few hundred million ringgit in working capital.''

“That would push our gearing to three or four times,” he added.

The company's net borrowings were about two times shareholders' funds at the end of September last year.

Hence, LCL has set a criterion that customers make a relatively high advance payment before the company would take on a job. At the same time, it also seeks faster progress payments.

“In those days, clients were given 75 days of credit after the certification of works was issued.

“Now, we're giving 45 days, sometimes even less, thus cutting the credit period by a month,” Low said.

He said the company would still have to borrow for working capital but “getting it from the client helps.” In addition to these sources, the company has proposed a rights issue to raise about RM80mil cash.

LCL is geared for strong growth. “We came here at the right time and did the right thing,” Low said.

By The Star (by C.S.Tan)

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