DBE/CIH

DBE has confirmed that it is in talks with a shareholder of CIH which includes a private placement exercise. It had plans for a private placement to raise funds for its working capital requirement. However, DBE said the talks with the CIH shareholders was at preliminary stage. As, the pricing for the proposed placement exercise have not been finalized yet.

As of Sept 30, 2011, DBE has a long-term loan of RM26.45mil and short-term loans and bank borrowings of RM24.2mil. It has RM3.26mil cash in its books.

The company looks set to finally turn around for its financial year ended Dec 31, 2012 (FY12), through the sale and leaseback of its factories and by increasing its plant utilitisation from a single shift to three shifts by the start of the second quarter of 2012.

DBE was back in the black as of the third quarter ended Sept 30, 2011. For the nine-month period, the company recorded a 70.79% drop in net profit to RM1.19mil while revenue was down 3.76% to RM100.83mil.

The company had been loss-making in the past four years due to depreciation charges of RM6mil from its assets worth about RM105mil. By embarking on the sale-and-lease exercise, it immediately free up working capital of RM50mil. This enables it to ramp up its production and also increases the bottomline by RM6mil.

In a sale-and-leaseback transaction, after a piece of property (usually a building housing business operations) is sold, the former owner leases it back from the buyer and continues occupying the property.

In 2010 DBE had undergone a series of corporate restructuring exercises, which included a capital reduction, a share premium reduction, and a rights issue.

These proposals have been fully completed on March 31, 2011 and the net impact is a significant reduction in its net gearing level from 4.5 times as at end Dec 2010 to only 0.6 times in end Sept 2011.

The group has also showed signs of a strong turnaround from a still net loss of RM2.3mil in the first quarter to net profits of RM1.3mil and RM2.2mil in the second and third quarters respectively.