London Biscuits - The Only Value Left Is In The Name

Let's look at the demise or downhill run by London Biscuits. We may then be able to see the various permutations involved and announced. How investors should react and so on.


2019 February, London Biscuits’ external auditors Nexia SSY had expressed a qualified opinion on the group’s financial statements for the financial year ended Sept 30, 2018 (FY18). It had raised concern on the group’s physical inventories held at Sept 30, 2018, which were stated in the statements as RM26.89 million at the group level and RM20.79 million at the company level,
(LESSON: any kind of qualified opinion, one should sell first... our professional accountants are loathed to qualify anything unless its really necessary ... sell first then do research later, a lot of time to buy back if you were wrong)

On July 8, London Biscuits slipped into PN17 status after it defaulted on a RM9.8 million in loan payment to Bank of Nova Scotia Bhd,

(July 3), London Biscuits said that its executive director Datuk Ranjeet Singh Sidhu and its chief financial officer Loo Seng Kit had voluntarily resigned. Both had taken on their roles only on June 17,
(LESSON: when top management or board members resign suddenly, another big red flag... this one more so as these two were less than one month into their jobs)

 (July 8), London Biscuits updated in a fresh filing with Bursa Malaysia that it was now a PN17 company due to the payment default,
(LESSON: PN17 generally will yield a shock selldown, PN17 is not all that bad, you have to assess how bad are the books as any potential asset injection or white knight to come in will have to judged on its viability... London Biscuit with just a cursory glance on numbers may require too much debt forgiveness and capital reduction to work for existing shareholders and creditors)

(Aug-Oct) Meileelanusa S/B disposed 5.9%, as of Oct 15 the company has only 7.35% from 13.8% in July,

 (Sept 24): Johor-based confectionery maker London Biscuits Bhd has been slapped with a lawsuit by Kuwait Finance House (Malaysia) Bhd (KFH) for RM5.06 million in outstanding debt,

(Oct 23), wind up petition and court-appointed PWCoopers Advisory as interim liquidators,

(Nov 12), MembersOne Ventures Fund, a Sydney based fund, has acquired 11.35%,

(Nov 15), in total London Biscuits has defaulted on RM285m

So who would buy now? Who are MembersOne Venture Fund? Only set up in 2017? Those who are cynical may say that the controlling shareholders, having sold at much higher levels, may have a reason to buy now to still "control" future firesale and/or white knight's

emergence. It is well known that most of the machinery in the company needs replacing or upgrading, hence you may even write that asset off altogether. SC needs to be more vigilant here looking at how volatile the changes have been to the company over the past 6 months. Too many things have happened, too many questions have surfaced.

Any value left in the company. The latest quarterly showed a Net Asset per share position of RM1.28. If you multiply by the number of shares 291m = RM372.5m. That is only slightly more than the loans being defaulted of RM285. Naturally net asset value would have already taken into account the loans, hence there should be a lot of vultures buying! But wait, they lose about 30-35 sen each quarter in net asset value. Looking at that trend alone, you would have avoided the stock 6 months ago. Judging on the qualified opinion and swift resignations of new management, one may suspect that the figures may not be reliable at all.

Hence it is prudent to ignore the net asset value altogether, thus the only value left is the brand name London Biscuits. People who buy biscuits are usually not share investors.

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