FG seeks exit from PN17 status, says projects not affected

by **Cals** Tue 01 Dec 2015, 00:19

YFG seeks exit from PN17 status, says projects not affected

By Gho Chee Yuan / The Edge Financial Daily | November 30, 2015 : 9:56 AM MYT

This article first appeared in The Edge Financial Daily, on 30 November, 2015.

KUALA LUMPUR: [size=16]YFG Bhd ([You must be registered and logged in to see this image.] Valuation: 0.30, Fundamental: 0.15), which slipped into Practice Note 17 (PN17) category in September, said it is in the midst of deliberating with its advisers to come up with a regularisation plan and hopes to submit it to Bursa Securities ( Valuation: 1.70, Fundamental: 2.30) before year end.

The loss-making mechanical and electrical service provider seeks to exit from PN17 status within 18 months after the submission.

“Since we were admitted into the PN17 list, we have been deliberating with our advisers to draw up a regularisation plan. We should be able to finalise the plan and make the necessary announcement [to Bursa Malaysia] in one month’s time from now,” YFG managing director Lim Chong Ling told The Edge Financial Daily in an interview.

[You must be registered and logged in to see this image.]

YFG slipped into PN17 status after its shareholders’ equity as at June 30, 2014 fell to less than 50% of its issued share capital.

As at June 30, 2014, YFG’s issued share capital totalled RM54.47 million, while its shareholders’ equity stood at RM24.9 million.

This was mainly due to YFG’s accumulated losses that had ballooned to RM38.7 million, causing the reserves to fall into a deficit of RM29.57 million. For the financial year ended June 30, 2013 (FY13), its reserves were at a deficit of RM16.01 million.

Nevertheless, Lim said the shortfall in shareholders’ equity of about RM2.4 million is still “manageable” for the group.

In November last year, YFG’s external auditors also issued a qualified opinion on the group’s financial statements for FY14, which included an emphasis of matter paragraph, highlighting events that may affect its ability to continue as a going concern.

Lim stressed that the group’s projects had not been affected by its PN17 status.

Lim said the proposed regularisation plan may require YFG to raise capital from a renounceable rights issue and par value reduction. However, he declined to disclose how much the group intends to raise.

“On top of that, we are looking to replenish our order book as it is part of the requirement that the group must be able to show it is sustainable after the regularisation,” he said.

Lim noted that YFG is now tendering some RM500 million worth of mechanical and engineering jobs locally, comprising infrastructure projects and high-rise buildings.

“We hope to secure about 15% to 20% of the tenders by the end of the year,” he said.

YFG currently has an outstanding order book of RM120 million, which will support its earnings for the next 18 months.

Meanwhile, Lim said the group will strengthen its footing in the country before venturing abroad.

“We ventured overseas between 2004 and 2008, but we didn’t do well. We must strengthen our footing here before we go overseas as the latter requires us to have a strong financial capability.

“Furthermore, there are many infrastructure projects in the country and we will be focusing on [securing] them,” he added.

YFG sank into the red with a net loss of RM11.04 million in FY14, compared to a net profit of RM4.7 million in FY13, due to lower margins recognised for completed projects.

In its latest quarterly results for the three months ended June 30, 2015, YFG managed to narrow its net loss to RM139,000 from RM12.69 million in the same period last year, which was impacted by provisions for loan impairment losses.

Revenue for the quarter fell 69.3% to RM9.04 million from RM29.4 million a year ago.

Year to date, YFG’s share price has fallen 3.5 sen or 46.67%, underperforming the FBM KLCI’s 4.47% decline. The stock peaked at 12.5 sen on March 18 and since then, it has been trading at between three sen and five sen.

YFG shares closed 0.5 sen or 11.11% lower at four sen per share last Friday, with a market capitalisation of RM24.36 million.
[/size]