Luster: US$2.8m shortfall in Opal Deluxe profit guarantee

PETALING JAYA: Luster Industries Bhd has reported a shortfall of US$2.82 million (about RM12.07 million) in the profit guarantee provided by Opal Deluxe Limited for the financial year ended Dec 31, 2017.

In a filing with Bursa Malaysia yesterday, Luster said it has proposed to amicably settle the issue by entering into a proposed supplemental agreement with Opal.

The proposed supplemental agreement is for Opal to cause a third party to lease to Pan Cambodian Lottery Corp Limited a plot of land and building that is suitable for gaming and casino operations.

The agreement is also for Opal to transfer 35% of its equity shareholdings of Opal in Pan Cambodian Lottery to Luster at a nominal consideration of US$1.

The group expects to execute the proposed supplemental agreement within six months.

To recap, Luster acquired 60% equity interest in Pan Cambodian Lottery, a Cambodian gaming company, from Opal for US$4.2 million (RM14.9 million) in 2015.

The purchase consideration of US$4.2 million is based on price earnings of seven times on the average net profit guaranteed of Luster for the three financial years of 2015, 2016 and 2017.

Pursuant to the supplemental agreement dated Sept 4, 2015, Luster would be able to enforce the mortgage on the remaining 35% of the issued and paid-up capital of the company held by Opal, if Luster is unable to achieve the aggregate profit guarantee of US$3 million by the financial year ending Dec 31, 2017.

The 35% of the issued and paid-up capital of Luster held by Opal comprises 350 ordinary shares of US$2,000 each, which are mortgaged to Luster in accordance with the terms of a mortgage granted by Opal in favour of Luster (security shares).

This would cause the proportionate number of the security shares, which is equivalent to the shortfall to be transferred to Luster or its nominee.

If the shortfall in profit guarantee is greater than the value of the security shares, Opal will pay the difference between the shortfall in profit guarantee and the value of the security shares in cash.

In a separate filing, Luster reported a 8.36% rise in net profit to RM1.65 million in the first quarter ended March 31, from RM1.52 million a year ago driven by its property development and construction segment, which recorded a pre-tax profit of RM700,000.

Revenue for the quarter rose 38.13% to RM40.01 million from RM29.61 million a year ago mainly due to the sales recorded in property development and construction segment. The segment recorded a revenue of RM11.3 million, generated from the construction project in Kota Baru which was awarded on March 10, 2017.

Moving forward, Luster said it is cautiously optimistic in delivering better results this year by; continuing its efforts to become an original design manufacturer player; explore additional jobs while also exploring opportunities for joint ventures for the property development and construction segments; and expand its sales network and representatives in Cambodia for its gaming and leisure segment.

Luster shed 4.76% or half sen to 10 sen yesterday with 2.03 million shares traded.