cash flow


Seacera sues Tan for unlawful EGM

PETALING JAYA: Seacera Group Bhd is taking legal action against its largest shareholder Datuk Tan Wei Lian (pix) and three others, who are seeking to remove eight of its directors.

In a filing with Bursa Malaysia, the company said it had on April 15 received a notice of EGM to be held on May 15 to consider resolutions to appoint six new directors and to remove eight existing directors.

The EGM was called by four members of the company namely Tan, Datin Sek Chian Nee, Jeannie Ooi Chin Nee and Liu Zhen who, in a notice of intention, claimed to hold a combined stake of at least 10% in the company.

According to the company, the four individuals only held a combined stake of 7.98% and not 10% as claimed, based on the record of depositors as of April 15.

“Therefore, the notice of EGM is in contravention of the Act (Companies Act 2016). It is unlawful, null and void. The company has engaged Messrs Lim, Chong, Phang & Amy to take necessary action(s) against Tan and the others,” it said.

However, Seacera’s filings with Bursa Malaysia showed that Tan held a direct 13.96% stake in the company prior to April 15, before subsequently raising his direct stake to 16.36% on April 17.

Meanwhile, Tan has pledged to invest RM30 million or more into Seacera to resolve the company’s cash flow and credit liability, labeling Seacera’s voluntary announcement on Thursday a “scare tactic”.

“This is obviously a scare tactic which is uncalled for. The company has, as of Dec 31, 2018, net assets amounting to approximately RM838 million and 501 acres of land free from encumbrances with a book value of approximately RM784 million,” he said in a statement in response to Seacera’s announcement.

He said Seacera’s receivables amount to about RM90 million and noted that the company had raised some RM15 million from the issuance of the employee share option scheme in February and March this year.

“Any business owner will know the company has stable financials to grow and sustain itself without being declared insolvent,” he added.

Tan said the company’s stock exchange filing shows that the current management has failed the shareholders and are incompetent in managing the company, and suggested that they voluntarily step down to pave the way for new directors to take over.

He also urged shareholders to attend the EGM on May 15 to remove eight out of Seacera’s current 10 directors and appoint six new directors namely Shirley Tan Lee Chin, Rizvi Abdul Halim, Datin Ida Suzaini Abdullah, Clarence Yeow, Chua Eng Chin and Marzuki Hussain.

Yesterday, Seacera issued a voluntary announcement saying that the company is potentially headed towards a default on its payment obligations in view of the highly likely event that it will not be able to proceed with its settlement proposals in time.

It also said that it would not be able to declare that it is solvent as the board will not be able to form an opinion that the company will be able to pay all its debts as and when they fall due.

The group had earlier announced the issuance of new shares and a private placement as part of its settlement proposals, which require shareholders’ approval by May 6, and had called an EGM on April 16 to obtain approval.

Seacera’s plans hit a bump when Tan initiated legal action to stop the company from proceeding with the proposed resolutions. A writ and application for injunction was served on the company, causing the EGM to be adjourned to a later date.

However, Tan said the EGM had taken place on April 16, where 45 shareholders representing more than 50% of Seacera’s shares out of a paid up capital of RM474 million unanimously voted against and rejected the resolutions.

He told a press conference on Wednesday that he plans to go to court to seek declaration on the EGM’s validity.

Trading in Seacera’s securities were halted for an hour this morning. The stock fell 4.48% to close at 32 sen with 43.55 million shares done.

Seacera flags potential default on debts

PETALING JAYA: Tile manufacturer Seacera Group Bhd has warned that it is potentially headed towards a default on its payment obligations in the highly likely event that it will not be able to proceed with its settlement proposals in time.

In a filing with Bursa Malaysia, the company said if it is unable to complete the proposals in a timely manner, it will be headed towards default, and possibly cross default on all its outstanding banking facilities and corporate guarantees of the banking facilities, on the payment obligations amounting to up to RM81 million.

In addition, the company will not be able to declare that it is solvent as the board will not be able to form an opinion that the company will be able to pay all its debts as and when they fall due.

In the event of a default in payment and inability to provide the solvency declaration, the company will trigger Practice Note 17 criteria and will face possible suspension and de-listing as an affected listed issuer.

Earlier on Jan 16, the group announced the proposed settlement of RM31.31 million owed by Seacera and two of its subsidiaries namely Seacera Ceramics Sdn Bhd and Seacera Properties Sdn Bhd to certain creditors. The amount was to be settled via the issuance of 149.09 million new shares at 21 sen per share.

The group had also proposed a private placement of up to 126.34 million new shares representing 30% of the existing issued share capital, to be subscribed by potential investors. The proposed exercise was expected to raise gross proceeds of about RM24.64 million, of which RM20 million was to be used to repay bank borrowings.

The settlement agreements were subject to the approval of Seacera shareholders to be obtained on or before April 15 (cut-off date), which was subsequently extended by 20 days to May 6.

The company was to convene an EGM on April 16. However, its largest shareholder Datuk Tan Wei Lian initiated legal action to stop the company from proceeding with the proposed resolutions. A writ and an application for injunction was served on the company and the EGM was adjourned to a later date.

Tan, who holds a 16% stake, withdrew a notice to convene an EGM to remove two directors last week due to a “technical” issue. However, he is planning for an EGM again on May 15 to remove eight directors and appoint six new directors.

Following the injunction, the company will be blocked from proceeding with the proposals, which are imminent for it to immediately address its current cash flow position. Without the proposals, settlement creditors, financial institutions and other creditors may initiate legal proceedings which may include winding up petitions against the group to recover their ascertained/agreed debts.

The group will also be unable to finance its working capital requirements for its tiles plant operations and/or other overhead expenses, and has decided to permanently shut down its only tiles plant operations in Selayang.

Seacera said the permanent shut down may result in the group not having adequate level of operations to warrant continued listing on the bourse as well as financial impairment of up to RM24 million, which may affect its financial results for the financial year ending Dec 31.

In view of the developments above, Seacera expects its share price to be negatively impacted.

The stock fell 1.47% to 33.5 sen with 28.6 million shares done, making it one of the most actively traded stocks prior to the suspension in the trading of its shares at 3.30pm today. Trading in its shares resume tomorrow.

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PETALING JAYA: While the revival of the East Coast Rail Link (ECRL) is positive to both the construction and building material sectors, it is no game-changer to these industries, AmInvestment Bank said.

“We estimate that the additional demand for cement and steel bars only amount to 1–2% of the current annual consumption of cement and steel bars locally,“ it said in a report last Friday.

Given the government’s strong commitment to fiscal prudence, the research house is concerned that this could be a “zero-sum game” as the revival of the still massive ECRL may deprive the government of its ability to implement other infrastructure projects over the next four to five years.

“We believe the market has also very much priced in the news, given the strong run-up in share prices of construction stocks over the last one to two months. Also after the run-up, valuations of construction stocks have become excessive with weight average FY19-20 P/Es (price-to-earnings ratio) of 17.2 times and 16.3 times which are unjustified given the muted industry outlook,“ it explained.

AmInvestment Bank added that it is uncertain at this point what will be the extent of the local participation in the project or if there is any change from 30% previously.

“Given the sharply reduced project cost, in order to minimise the loss of profits, we are doubtful that if the Chinese contractor will offer substantial sub-contracting works to local players, and in the event it is required to do so, if it will offer high-value jobs (such as tunnelling and construction of large bridges) to local players.”

It maintained an “underweight” recommendation for the construction sector on the back of the continued cutback in public infrastructure spending as the government tightens its belt; the prolonged downturn in the property market with oversupply in virtually all segments comprising residential, commercial, office and retail; and the deterioration in cash flow along the entire value chain due to slow payment (or non-payment) by both public and private sector clients, whereby some of these receivables problems have escalated to defaults and contract disputes.

The total cost for the ECRL has been reduced by RM21.5 billion to RM44 billion from RM65.5 billion. Further details of the revised deal will be revealed tomorrow.

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Genting Singapore shares fall on casino tax hikes

SINGAPORE: Genting Singapore Ltd’s shares plunged to a three-month low yestersday, after the casino operator unveiled a S$4.5 billion (RM13.5 billion) expansion plan and the government said it would hike casino entry prices and taxes.

Genting and Las Vegas Sands Corp have committed to spend about S$9 billion on expanding their Singapore resorts, the city-state’s government said on Wednesday, adding that it would increase the casino entry levies for citizens and permanent residents from April 4.

The government, which agreed to extend the exclusivity period for the two casinos to end-2030, will raise tax rates on gross gaming revenue from February 2022 through a tiered structure.

“Higher investment cost, levies to be introduced on April 4 and gaming taxes from CY22F onwards are near-term downers,” CGS-CIMB analyst Cezzane See said in a note.

While Genting’s investment plan has long-term benefits, it would “likely reset its (the firm’s) earnings growth and cash pile,” See said.

The expansions include the construction of a fourth tower at the Marina Bay Sands hotel owned by Las Vegas Sands, while Genting will add a Minion Park and Super Nintendo World among its new attractions at its resort on the island of Sentosa.

Singapore received a record 18.5 million visitors last year, but growth in their spending slowed as they cut back on shopping.

Nomura analysts said Genting’s capital expenditure was higher than their expectations and meant minimal free cash flow for the next 4-5 years, which could cap near-term dividends.

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