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Thursday, April 10, 2008

The sky's the limit for LCL

The early days were difficult for LCL Corp, with no income for months. But founder and group MD Low Chin Meng's 'stubborn' personality kept the tiny company going. Today, with a RM1billion order book, LCL hopes to be an aggressive regional player and ultimately, the world's largest fit-out company. Sharon Kam reports.

We never tire of stories about Malaysians who beat the odds and achieve success. LCL Corp Bhd's founder and group managing director Low Chin Meng is one such story.

From a tiny interior renovation outfit, LCL Corp has bloomed into a Main Board-listed company with 24 subsidiaries and seven manufacturing plants. Its order book has breached RM1 billion, mainly from overseas projects, the bulk of which is in real estate boomtown Dubai.
Low says it is his "stubborn" personality that saw him through the early days of going without income for months, when the company was "a one-man show".

"If I want something, I will try my very best to go for it," he says.

Born and bred in Kajang, Selangor, Low has set up the company's base and manufacturing plants there as well.

"Our focus may be overseas but our home is here. We will be a billon-ringgit turnover company in a year's time, which is very soon. We are hoping to be one of the most aggressive players in the region and ultimately to be the world's largest fit-out company," he says determinedly.
Low dropped out of school when he was 15 so he could start working to contribute to the family income. "My parents were rubber tappers. My mum was ill for some time and she passed away when I was 15. I could not afford to continue school. What's more, I had two younger siblings to take care of. So I decided to quit school and took up carpentry with the help of some relatives," he shares with City & Country.

With his skills as a carpenter, he worked for various companies but harboured an ambition to one day be his own boss.

"When I started working, I was earning only RM5 a day. It was definitely not enough for the family so I thought the only way I could earn more was to have my own business," says Low. "I did not know a single word of English when I left school but I knew that if I were to succeed in business, I had to learn."

So Low picked up the English language on his own and now speaks it fluently.

At 23 years of age, he and two of his colleagues at the furniture company for which they were working decided to set up LCL Furniture Construction and Engineering Works, a partnership company with each of them paying RM500 from their pockets. LCL is the acronym of their surnames. The other two partners left the company a few years later but the name of the company was retained.

"We had no working capital. Life was very difficult. There were no weekends, long hours every day because we had to do everything ourselves. We tried to get our hands on whatever projects we could find. What we did was we subcontracted some work to factories to produce the furniture or whatever we needed. So we were like fit-out management contractors."

Their big break came with the development of the Kuala Lumpur International Airport. (KLIA) "This was our turning point in becoming a key player in the market."

LCL had been doing some small jobs for Malaysia Airlines at the old Subang Airport so when tenders were called, LCL was selected in its bid for some of the main fit-out packages for the KLIA.

After KLIA, their next major development in the country was Putrajaya. "We were and still are very involved as an interior contractor for government buildings and offices there," Low says. These included the Finance Ministry, the Foreign Affairs Ministry and the National Registration Department.

As a fit-out company, LCL stands out because it produces its own components, making it a one-stop interior fit-out centre. Its wood division produces generic and loose wooden furniture as well as customised built-in furniture. Its other divisions comprise metal and stainless steel, plaster, stone, and fabric and cushions. Most of these were acquired when they were LCL's subcontractors. "About 70% of the fit-out materials for our projects are produced ourselves. Because of this, we could expand overseas. We can deliver the A to Z of fit-out. Today, we have 600,000 sq ft of production space in the form of factories and plants," says Low.

Producing its own materials results in quality control and punctual delivery. "We realised that this is important in this business. The client is willing to pay for quality and punctual delivery. For example, if we want to run the factory 24 hours, we can. If we subcontract it out, we have no say.

"Our current production capacity is enough to meet at least 60% of the needs of our current projects, which means we outsource 40% and we will maintain this ratio for some years," offers Low.

LCL's expansion overseas began soon after it was listed in 2004 on the Second Board of Bursa Malaysia. It selected the Middle East and India as the main countries for its expansion abroad.
The focus on the Middle East is not difficult to understand since there is a real estate and construction boom there. "There are a lot of new buildings coming up there, so it gives us a lot of opportunities, which could last for many years. Demand for our kind of business is high. They are also paying us a good premium, giving us a high profit margin," says Low.

But the real estate boom in Dubai is not the only reason LCL is there.

The group's underlying strategy is to "go where the oil flows", says Low. "Where the oil flows is where the people have the spending power and would be willing to spend on the best of everything."

This is also the reason it has ventured into Kazakhstan, located in the region that has the third-largest oil reserve in the world, according to petroleum scientists.
LCL's Middle East office is based in Dubai but it also has an office in Doha and is entering Abu Dhabi and Bahrain.

"As one would have noticed, the buildings there are not just buildings. They build the ambience, the lifestyle. A hotel is not just any hotel and they are willing to spend and develop the best," Low explains.

However, to balance things out in case things got too "hot" in the Middle East, LCL has built its presence in India as well. "We find that it is an up-and-coming market, where there is room for upgrading of living standards. The population is big and if just 1% or 2% of the population can afford our product, it would be big enough for us," Low offers.

The Breeze Lounge at Westin Langkawi Hotel was fitted out by LCL

LCL has signed a strategic partnership with IJM to focus on interior fit-out (IFO) projects in India and has since delivered several boutique hotels there, including the Novotel Hotel, Hyderabad, India (completed in 2006) and Ista Hotel also in Hyderabad, completed recently. It has also been appointed by Sun Gumberg, a joint venture between JJ Gumberg and Sun Group, as the IFO contractor for their proposed mixed development projects in India. The appointment is for eight years.

The first two years of its entry into a foreign market are used to build a strong foundation in the respective country. "We did a lot of market research, getting to know the local social and business cultures, made contacts and build networks. Only in 2006 did LCL take on large projects worth more than RM100 million each and today, we have close to RM1 billion worth of projects in hand. We believe the numbers will continue to grow for the next few years," says Low.

In 2006, overseas projects contributed 30% to the group's turnover. The following year, the contribution shot up to 70% and this is estimated to climb to 85% this year.
"We also achieved a 70% growth in group turnover last year and for this year, we are targeting 100% growth," says Low.

To date, LCL has sent about 1,000 Malaysians abroad working for LCL. "About 70% of our staff overseas are Malaysians because they have the skill. We train them and we provide them their basic needs."

LCL also has its board members to thank for its successful ventures overseas. "If you look at the members of our board, some of them are former ambassadors who, through their experience, network and advice, helped us establish ourselves there. So, we need to give them credit."
LCL's first major project in Dubai was the Atlantis Hotel in the Palm project, worth RM108 million, secured in April 2006. A year later saw the company securing several contracts, beginning with a RM34.2 million contract for the Palm Juneirah Aarina Apartments in April 2007. The following month, it secured a RM119.6 million contract for the Dubai Marina Mall and Hotel. This was followed quickly by contracts for the Prime Tower Office tower worth RM60 million and the Burj Dubai Mall Hotel worth RM139 million.

In January this year, it secured a RM145 million contract for the Tiara United Towers hotel and serviced apartments and in February, it won a RM295 million contract to furnish 14 Red Line stations for Dubai Metro System's fully automated light rail transit network.

LCL is currently bidding for the fit-out package for JW Marriot Hotel in Kazakhstan. It is also actively seeking to establish a foothold in the new markets of Bahrain and Libya and has submitted bids for some projects in these markets. LCL is also bidding for contracts in one of the Singapore integrated casino developments. Locally, it is eyeing opportunities in potential developments in the recently launched economic corridors. It is also looking at a number of high-end hotels that are due for refurbishment.

By The EDGE Malaysia - City & Country

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