KUALA LUMPUR: Shapadu Corp Sdn Bhd is expected to emerge as a substantial shareholder in LFE Corp Bhd, through the purchase of new shares to be issued in a private placement. However, this is subject to Bursa Malaysia’s approval for  the Practice Note 17 (PN17) construction outfit’s proposed regularisation plan. 

On June 19 last year, LFE (fundamental: 0.15; valuation: 1.2) proposed a private placement of up to 66.67 million new shares in the company to be subscribed by strategic investors at an issue price of 30 sen per placement share, as part of its proposed regularisation exercise.

It had on July 25 submitted an application for its proposed regularisation plan to Bursa. The application is still pending the regulator’s decision. 

Shapadu group executive director Datuk Rosthman Ibrahim told The Edge Financial Daily that the diversified group, which is involved in the oil and gas (O&G), property development and logistic services, hopes to enter the construction market through this investment, which is also subject to approval by LFE shareholders.

The proposed private placement would see Shapadu subscribing to a 15% stake in LFE based on a RM20 million investment, said Rosthman. It is understood that LFE plans to use proceeds from the private placement primarily to reduce debt and for working capital.

Shapadu is already a shareholder of LFE, but with less than 5% shares.

“LFE has been in the construction business for quite some time (founded in 1967). The company is currently run by the second generation.

“Based on LFE’s established track record, for example, of working with IJM Corp Bhd, Sunway Bhd and Zelan Bhd in the RM1.32 billion Al Reem job in Abu Dhabi back in 2006, we look forward to working closely with the firm to capitalise on market opportunities and drive enhanced shareholder value,” he said, when asked why Shapadu chose to invest in the PN17 company.

The PN17 criteria was triggered when LFE’s shareholders’ equity for the financial year ended July 31, 2012 (FY12) fell below 25% of its issued capital. 

LFE had earlier attracted attention when its former director Alan Rajendram Jeya Rajendram was found guilty of furnishing false statements to Bursa in relation to LFE Corp’s unaudited consolidated income statements for its FY07 ended Dec 31, and was sentenced to a year in jail and fined RM1.2 million in 2012.

For starters, LFE had on Dec 16, 2014 bagged a RM350 million contract from Shapadu to build the Shapadu City Village development in Precinct 2, Putrajaya. The project is expected to be completed in 36 months from Dec 16, 2014.

Rosthman said Shapadu plans to award its other property projects under development to LFE following completion of the share placement, which is targeted by May this year.

“[Through the private placement,] we (Shapadu) will emerge as one of the major shareholders together with the Liew family. Our aim is specifically to improve the performance of the company by injecting all our property projects into LFE (at a later stage), which will remain as a construction player,” said Rosthman.

The Liew family owns 23.04% of LFE Corp as at March 30, 2015. 

For the six months ended Jan 31, 2015, LFE reported a 55.2% increase in net profit to RM523,000 from RM337,000 a year ago. Revenue, however. fell 11.5% to RM16.59 million.

This article first appeared in The Edge Financial Daily, on March 31, 2015.