Linear sees entry of new white knight
KUALA LUMPUR: PN17-status company Linear Corporation Bhd is beginning to see some light at the end of the tunnel after the entry of a white knight with the appointment of three new directors, who are planning to put the company back on its feet again.
This confirms an earlier report in The Edge Financial Daily on June 24, 2010 that the company was undertaking turnaround plans. The three new directors: Datuk Ling Keak Ming, independent and non-executive director; Lim Hun Beng, non-independent and non-executive director; and Adam Bin Bachek, independent and non-executive director were appointed yesterday, according to statements to Bursa Malaysia.
Ling, a former director of Magnum Corporation Bhd from 2000 to 2007, is closely associated with the MWE Holdings group, where he is currently managing director of MWE Advanced Structure Sdn Bhd and MWE Golf & Country Club Bhd.
It is learnt that the previous white knight, who owned a 19.92% stake in Linear via privately held Crystal Insight Sdn Bhd has sold his stake to this new white knight some three weeks ago. The transaction price, however, is not known. As of yesterday, no details of substantial shareholder changes in the company have been announced to Bursa Malaysia.
Linear’s previous executive director Yap Chee Keong, who resigned on Aug 30, 2010, was the old white knight’s proxy to plan a turnaround for the company. After Yap’s short stint at the company, sources say the old white knight decided not to proceed with the task of pumping in more money into the company because he had other commitments.
Penang sources tell The Edge Financial Daily that the new white knight, a low profile businessman based in Penang, now plans to pump in additional funds to revive Linear.
With the additional funds, this may also change the previous turnaround plans, which had included a sale and leaseback of Linear’s factory plant in Penang to raise cash for the company’s operations.
"A new white knight removes the need for the company to sell the company’s core asset when the cash is pumped in," said a source.
An announcement by Linear to Bursa Malaysia with its recent second quarter (2Q) results stated that there are plans for "new injection of funds for working capital by potential new investors as a prelude to concluding a corporate restructuring exercise to get the company out of current PN1 and PN17 status".
With the appointment of the three new directors to Linear’s board, two other directors have also resigned, apart from Yap.
Announcements to Bursa Malaysia yesterday saw the resignation of a previous non-independent and non-executive director Eswaramoorthy Pillay s/o Amuther who was earlier charged in the court for abetting former LFE Corp Bhd director Alan Rajendram Jeya Rajendram in committing securities fraud and four other Penal Code offences.
Alan Rajendram was also a director at Linear before resigning in May 18, 2010, following the saga of the RM1.66 billion "King Dome project" in Manjung, Perak that was awarded by Seychelles-based Global Investment Group Inc (GIG).
The saga unravelled when the project was called into doubt and Linear had transferred all its cash of RM36 million to GIG. Alan Rajendram and Eswaramoorthy Pillay, who called the shots at Linear, are now out of the company.
Meanwhile, Linear had on Monday reported its 2QFY10 results for the period ended June 30, 2010. The company turned in a net profit of RM2.69 million, or 3.6 sen per share, on the back of RM2.77 million in revenue. Its net assets per share stood at 71 sen.
It is learnt that despite the loss of almost all of the company’s cash due to the King Dome project, Linear is still able to carry out its business, but with quick turnaround timeframes, to reduce large cash commitments.
Sources tell The Edge Financial Daily that Linear has still been able to pay its workers with a maximum one month delay in wages despite the current cash situation.
"It is still business as usual for Linear, workers wages are still being paid but sometimes slightly delayed. There is still money to be made from this business," said a source.
Linear had on Aug 10, 2010 appointed PricewaterhouseCoopers Advisory Services Sdn Bhd (PwC) as a special auditor to undertake an independent investigation into the financial affairs of the company.
PwC would be tasked with identifying irregularities, including but not limited to the existence of the operations and conduct of the prime savings and trust accounts in Sweden where RM36 million was purportedly paid out.
Linear’s share price yesterday closed 0.5 sen higher to 8.5 sen on heavy volume of two million shares.
This article appeared in The Edge Financial Daily, September 2, 2010.