Showing posts with label KNM. Show all posts
Showing posts with label KNM. Show all posts
August 8, 2014
April 17, 2012
Stock Overview - KNM - 17 Apr 2012
Stock Name: KNM
Company Name: KNM GROUP BHD
KNM ( 7164 : 0.90 ) : Targeting 1.04/stop loss 0.87
Description
Resistance : 0.93 1.04 1.10
Support : 0.88
RSI of 57
RSI is recovering
STOCHASTIC
It remains firm
TREND INDICATOR
Comment
Once it scales above 0.93, the next target will be 1.04. Stop loss is at 0.87
Trading Strategy
Buy. Stop loss is at 0.87
Source:Jupiter Securities Research 17 April 2012
Company Name: KNM GROUP BHD
| Research House: JUPITER | Price Call: BUY | Target Price: 1.04 |
KNM ( 7164 : 0.90 ) : Targeting 1.04/stop loss 0.87
Description
Resistance : 0.93 1.04 1.10
Support : 0.88
RSI of 57
RSI is recovering
STOCHASTIC
It remains firm
TREND INDICATOR
Comment
Once it scales above 0.93, the next target will be 1.04. Stop loss is at 0.87
Trading Strategy
Buy. Stop loss is at 0.87
Source:Jupiter Securities Research 17 April 2012
April 12, 2012
KNM Group - Extends deadline for acquisition of Peterborough land Sell
Stock Name: KNM
Company Name: KNM GROUP BHD
Company Name: KNM GROUP BHD
| Research House: AMMB | Price Call: SELL | Target Price: 0.75 |
' We maintain SELL on KNM Group with an unchanged fair valueof RM0.75/share pegged to an FY12F PE of 10x ' a 30% discount to the oil &gas sector's 15x.
' KNM paid RM0.3mil (GBP65,000) to extend the completion ofthe proposed acquisition of a 55-acre vacant development land in Storey's BarRoad, Peterborough, England by one month from 6 June 2012 to 6 July 2012.Recall that the group had earlier in January this year paid an exclusivity feeof GBP500,000 (RM2mil) to reserve the land for its proposed GBP25mil (RM120mil)purchase from Poplar Holdings Ltd (Poplar).
' The land is registered under Poplar's wholly-owned PoplarInvestments Ltd, which is based on the Isle of Man tax-haven. This fee is only refundable when Poplar isunable to execute the sale due to 'legal or other circumstances beyond itsreasonable control'. This project, which was announced back in December 2010,was set up by local businessmen who were granted consent for this project bythe UK Government's Department for Energy and Climate Change (DECC) in November2009. The concessionaire had earlier attempted to secure a bond to finance thisproject but subsequently sought a US-based investment fund, which also appearsto be unsuccessful.
' With the Peterborough land ownership, we understand thatKNM could possibly end up with an 80% stake (with the balance held by UK-basedsponsors) in this waste-to-energy concession, which could cost up to GBP600mil(RM2.9bil), if the group could secure external borrowings. Additionally, thereis also a possibility that KNM could end up with a 51%-stake in the separateUS$248mil (RM760mil) waste-to-energy 40MW plasma gasification facility in SriLanka in a joint venture with Octagon Consolidated.
' We view these developments negatively as the huge capitalexpenditure will likely elevate the group's current net gearing level of 0.5xto a worrisome 2.8x, unless other investors dilute KNM's equity stakes in theseprojects to an associate level. Currently, KNM is still sourcing for financingfor both projects.
' KNM's current order book stands at RM5.8bil, with neworders secured up to RM1.8bil for this year and tendering up to RM18bilpotential orders. But as noted in our past reports, over half of the group'sorder book does not have clear visibility in commencement.
' Normalising tax rates, KNM currently trades at a priceyFY12F PE of 30x, way above the oil & gas sector's. This is unjustifiedgiven KNM's persistently poor quarterly earnings delivery.
Source: AmeSecurities
April 3, 2012
KNM ' Fair value unchanged at RM0.68
Stock Name: KNM
Company Name: KNM GROUP BHD
Source: RHB Research - 3 April 2012
Company Name: KNM GROUP BHD
| Research House: RHB | Price Call: SELL | Target Price: 0.68 |
KNM ' Fair value unchanged at RM0.68 Underperform
- Despite a lackluster YTD performance from the oil & gas stocks compared to Brent crude which rose by 14%, we remain positive on the sector's long-term outlook due to sustained oil and gas spending. We thus expect earnings to continue playing catch up with valuations.
- We are not changing our benchmark valuation, currently at 15x CY12 earnings with either a premium or a discount accorded to each oil & gas stock under our coverage. Our oil & gas stock calls are unchanged other than Perdana Petroleum which has been upgraded to Market Perform due to a pull back in its share price.
Source: RHB Research - 3 April 2012
February 29, 2012
KNM Group - Residual 4QFY11 provisions as expected SELL
Stock Name: KNM
Company Name: KNM GROUP BHD
Company Name: KNM GROUP BHD
| Research House: AMMB | Price Call: SELL | Target Price: 0.75 |
We maintain SELL on KNM Group with an unchanged fair valueof RM0.75/share pegged to an FY12F PE of 10x ' a 30% discount to the oil &gas sector's 15x.
We maintain FY12F-FY13F net profits for now with the expectationsthat KNM would start afresh on a clean slate next year on the back of new orderaccretions. Note that we are projecting an FY13F earnings decline of 9% due to theend of the recognition of the Borsig tax incentive. Hence, our FY12F-FY13Fearnings are currently 22%-53% below consensus.
We introduce FY14F earnings with a growth of 30% largely dueto a 5% increase in new order assumption and a 1ppt- improvement in fabricationmargin.
KNM's FY11 net profit loss of RM83mil was not a surprise, comingin within our and street expectations. The residual provisions for the group'sprojects were largely expected following the group's shocking 3QFY11 net lossof RM116mil.
OoQ, KNM's 4QFY11 pre-tax loss plunged to RM11mil from RM145milin 3QFY11, which had provisions that included RM80mil for cost overruns onvarious projects in Asia and Oceania and RM50mil for doubtful debt write-offs.We understand that KNM was still in the red due to additional provisions ofRM30mil in 4QFY11.
KNM has recently entered into an option agreement to acquirea 55-acre vacant land for the RM2.2bil Peterborough Renewable Energy Ltd (PREL)project. With the land ownership, we understand that KNM could possibly end upwith an 80% stake (with the balance held by UK-based sponsors) in thiswaste-to-energy concession if the group could secure external borrowings. Thismay be a negative development as this huge project will likely elevate thegroup's current net gearing level of 0.5x to 0.9x, unless other investorsdilute KNM's equity stake to an associate level.
KNM's current order book stands at RM5.8bil, with new orderssecured up to RM1.8bil for this year and tendering up to RM18bil potentialorders. But as the order book includes (1) the RM2.2bil Peterborough RenewableEnergy Ltd (PREL) project, (2) RM908mil Lukoil contracts in Uzbekistan, and (3)the recently awarded US$200mil (RM638mil) waste-to-energy Sri Lankan EPCC jobfrom Octagon Consolidated, we note that over half of the group's order bookdoes not have clear visibility in commencement.
Normalising tax rates, KNM currently trades at a pricey FY12FPE of 30x, way above the oil & gas sector's. This is unjustified givenKNM's persistently poor quarterly earnings delivery.
Source: AmeSecurities
KNM (FV RM0.80 - SELL) FY11 Results Review: In The Red, as Expected
Stock Name: KNM
Company Name: KNM GROUP BHD
Company Name: KNM GROUP BHD
| Research House: OSK | Price Call: SELL | Target Price: 0.80 |
KNM's FY11 results were within our expectations as we hadearlier anticipated a net loss of aboutRM70.0m. The loss was mainly attributed to intense competition, especially inthe mid to lower end process equipment range, provisions made for foreseeablelosses and credit impairment. Although the company has a RM5bnstrong orderbook and atenderbook worth over RM17.0bn, we haveyet to see these figures translate into positive bottomline contribution. Assuch, we continue to hold a negative outlook on KNM. Maintain Sell.
Within estimates.KNM's FY11 results were below consensus but within our expectations, as we hadearlier projected the company will makea net loss of some RM70.0m. Although its4QFY11 revenue of RM579.8m was 30.2% higher q-o-q due to higher revenue recognition from itsexisting and new projects, it only managed to report a small net profit ofRM3.0m. This was due to the intense competition in the mid to lower end process equipment segment as well as provisionsmade for foreseeable losses. Furtheraggravating the already weak FY11 numbers is the presence of some credit impairment, which led to a netloss of RM83.4m compared with net profit of RM118.2m in FY10.
Business environmentcontinues to be challenging. Despite the recovery in crude oil price toabove USD100/barrel, we believe thebusiness environment for process equipment manufacturers remains challengingdue to the intense competition, which may spark off a price war in which the winners would be thecustomers. Also, we think the recoveryin the global O&G industry is still slow and has yet to catch up with thepace in mid-2008 when oil price soared to a record USD147/barrel. As such, the oversupply of processequipment will continue to preventprocess equipment manufacturers from reaping healthy product margins.
Maintain Sell.Our fair value for KNM remains unchangedat RM0.80 based on the existing PER of13x FY12 EPS. Although the company has a strong orderbook exceeding RM5.0bn andtenderbook worth more than RM17.0bn, we have yet to these numbers translate into positive bottomlinecontribution. That said, we continue to hold a negative view on KNM'soutlook going forward.
Source: OSK188
KNM - Smaller operating losses
Stock Name: KNM
Company Name: KNM GROUP BHD
KNM Group; Fully Valued; RM0.94
Price Target: RM0.70; KNMG MK
4Q11 earnings beat expectations. Uncertain outlook due to sluggish EU economy and poor project execution. Maintain Fully Valued rating and RM0.70 TP.
Source: HwangDBS Research 29 Feb 2012
Company Name: KNM GROUP BHD
| Research House: HWANGDBS | Price Call: SELL | Target Price: 0.70 |
KNM Group; Fully Valued; RM0.94
Price Target: RM0.70; KNMG MK
4Q11 earnings beat expectations. Uncertain outlook due to sluggish EU economy and poor project execution. Maintain Fully Valued rating and RM0.70 TP.
Source: HwangDBS Research 29 Feb 2012
KNM Group: Upgrade to Hold - Above expectations
Stock Name: KNM
Company Name: KNM GROUP BHD
Upgrade to Hold. Results were ahead of expectations. KNM was operationally positive in 4Q11, a pleasant surprise. While we remain cautious over its cost management abilities, the worst appears to be over for KNM, with most of the negatives priced in following a 39% QoQ decline in its share price. Against this backdrop, we upgrade KNM to a Hold with an unchanged TP of RM0.88 on 8x 2013 PER. KNM needs to deliver a consistent set of quarterly results to warrant further re-rating.
Maybank Research 29 Feb 2012
Click here for full report
Company Name: KNM GROUP BHD
| Research House: MAYBANK | Price Call: HOLD | Target Price: 0.88 |
Upgrade to Hold. Results were ahead of expectations. KNM was operationally positive in 4Q11, a pleasant surprise. While we remain cautious over its cost management abilities, the worst appears to be over for KNM, with most of the negatives priced in following a 39% QoQ decline in its share price. Against this backdrop, we upgrade KNM to a Hold with an unchanged TP of RM0.88 on 8x 2013 PER. KNM needs to deliver a consistent set of quarterly results to warrant further re-rating.
Maybank Research 29 Feb 2012
Click here for full report
January 13, 2012
KNM Group (Sell): Riding through a transition phase
Stock Name: KNM
Company Name: KNM GROUP BHD
Target price cut to RM0.88 (-19%) following a 10-19% downgrade in FY12-13F earnings forecasts on lower revenue recognition. While margin pressure has abated on improving order flows, we are cautious of KNM's cost management abilities and so retain a conservative stance on our estimates. KNM needs to deliver a consistent set of quarterly results to warrant a re-rating. Sell maintained.
Maybank research (13 January 2012)
Click here for full report
Company Name: KNM GROUP BHD
| Research House: MAYBANK | Price Call: SELL | Target Price: 0.88 |
Target price cut to RM0.88 (-19%) following a 10-19% downgrade in FY12-13F earnings forecasts on lower revenue recognition. While margin pressure has abated on improving order flows, we are cautious of KNM's cost management abilities and so retain a conservative stance on our estimates. KNM needs to deliver a consistent set of quarterly results to warrant a re-rating. Sell maintained.
Maybank research (13 January 2012)
Click here for full report
December 7, 2011
November 23, 2011
KNM active, down in early trade
Stock Name: KNM
Company Name: KNM GROUP BHD
KUALA LUMPUR (Nov 23): KNM GROUP BHD [] shares fell in early trade on Wednesday after it posted net loss RM116.29 million for third quarter ended Sept 30, 2011 compared to net profit RM56.09 million a year earlier, due mainly to one off provision for foreseeable losses and credit impairments.
At 9.05am, KNM lost nine sen to RM1.14 with 2.73 million shares done.
The company said on Nov 22 that revenue for the quarter rose 6.41% to RM445.18 million from RM418.36 million in 2010.
Loss per share for the quarter was 11.88 sen compared to earnings per share of 5.69 sen a year earlier, while net assets per share was RM1.69.
There was no dividend declared or recommended during quarter under review.
However, KNM said it had adopted a dividend policy of distributing at least 50% of its consolidated net attributable after tax profit (subject to the availability of distributable reserves and compliance of financial covenants) with effect from financial year ending Dec 31, 2012.
For the nine months ended Sept 30, KNM posted net loss RM86.42 million compared to net profit RM110.57 million in 2010, while its revenue grew 19% to RM1.4 billion from RM1.17 billion.
MIDF Research downgraded KNM to Sell from Neutral with a lower target price of 85 sen (from R1.22), ascribing a lower targeted PER12 of 7x (from 8x), which is 1-std deviation below its 5-year historical multiple.
'The management also surprisingly announced a dividend policy of distributing at least 50% of its net profit.
'This appears like a desperate act to try to stem selling pressure expected after the huge loss in 3QFY11,' the research house said on Wednesday.
Company Name: KNM GROUP BHD
| Research House: MIDF | Price Call: SELL | Target Price: 0.85 |
KUALA LUMPUR (Nov 23): KNM GROUP BHD [] shares fell in early trade on Wednesday after it posted net loss RM116.29 million for third quarter ended Sept 30, 2011 compared to net profit RM56.09 million a year earlier, due mainly to one off provision for foreseeable losses and credit impairments.
At 9.05am, KNM lost nine sen to RM1.14 with 2.73 million shares done.
The company said on Nov 22 that revenue for the quarter rose 6.41% to RM445.18 million from RM418.36 million in 2010.
Loss per share for the quarter was 11.88 sen compared to earnings per share of 5.69 sen a year earlier, while net assets per share was RM1.69.
There was no dividend declared or recommended during quarter under review.
However, KNM said it had adopted a dividend policy of distributing at least 50% of its consolidated net attributable after tax profit (subject to the availability of distributable reserves and compliance of financial covenants) with effect from financial year ending Dec 31, 2012.
For the nine months ended Sept 30, KNM posted net loss RM86.42 million compared to net profit RM110.57 million in 2010, while its revenue grew 19% to RM1.4 billion from RM1.17 billion.
MIDF Research downgraded KNM to Sell from Neutral with a lower target price of 85 sen (from R1.22), ascribing a lower targeted PER12 of 7x (from 8x), which is 1-std deviation below its 5-year historical multiple.
'The management also surprisingly announced a dividend policy of distributing at least 50% of its net profit.
'This appears like a desperate act to try to stem selling pressure expected after the huge loss in 3QFY11,' the research house said on Wednesday.
Maybank IB Research maintains Sell on KNM
Stock Name: KNM
Company Name: KNM GROUP BHD
KUALA LUMPUR (Nov 23): Maybank Investment Bank Research is maintaining its sell call on KNM GROUP BHD [] with a lower target price of RM1.08.
It said on Wednesday the RM116 million net loss in 3Q11, which was due to operating impairments and provisions totaling RM150 million, wiped out 1H's net profit of RM30 million and validates our concerns on cost management.
'We now expect 2011 to be in the red, on expectation that losses should extend into 4Q. We also cut 2012-13 net profit forecasts by 33%-54% on lower EBIT margin assumptions.
'Following this, we downgrade target price to RM1.08 (-9%) based on a lower PER multiple of 8 times as we roll over our valuations to 2013 (previously 10x 2012 earnings),' it said.
Company Name: KNM GROUP BHD
| Research House: MAYBANK | Price Call: SELL | Target Price: 1.08 |
KUALA LUMPUR (Nov 23): Maybank Investment Bank Research is maintaining its sell call on KNM GROUP BHD [] with a lower target price of RM1.08.
It said on Wednesday the RM116 million net loss in 3Q11, which was due to operating impairments and provisions totaling RM150 million, wiped out 1H's net profit of RM30 million and validates our concerns on cost management.
'We now expect 2011 to be in the red, on expectation that losses should extend into 4Q. We also cut 2012-13 net profit forecasts by 33%-54% on lower EBIT margin assumptions.
'Following this, we downgrade target price to RM1.08 (-9%) based on a lower PER multiple of 8 times as we roll over our valuations to 2013 (previously 10x 2012 earnings),' it said.
October 12, 2011
KNM to build RM628m waste to energy plant
Stock Name: KNM
Company Name: KNM GROUP BHD
KNM Group Bhd
(Oct 12, RM1.30)
Maintain neutral at RM1.22 with target price of RM1.22: KNM announced yesterday that it has secured a conditional turnkey engineering, procurement, construction and commissioning (EPCC) contract for a waste to energy (WTE) plant worth US$200 million (approximately RM628 million) from Orizon Renewable Energy (Pte) Ltd (ORE), an indirect 51%-owned subsidiary of Octagon Consolidated Bhd. To note, earlier last week KNM was also awarded a RM70 million contract by Octagon to manufacture an advanced thermal gasification reactor.
The WTE plant is a public private partnership project between ORE and the Waste Management Authority of Western Province, an agency under the government of Sri Lanka. The plant, which will be located in Karadiyana, Thumbowila, Kesbewa, Colombo, Sri Lanka, has the capacity to process up to 1,000 tonnes per day of municipal solid waste and generate a minimum of 40MW of electricity.
Should the EPCC contract be finalised, KNM's order backlog is expected to increase to between RM3.5 billion and RM3.8 billion (excluding the RM2.2 billion Peterborough project). We understand that the construction of the WTE plant is expected to start in 2Q12 and be completed in 2Q14.
We understand that ORE has received the government's approval to build-own-operate the WTE plant. The ground-breaking ceremony was held last week. The electricity will be sold to Ceylon Electricity Board, the Sri Lanka state-owned electricity company. Hence, we reckon the government is committed to this project.
However, we are concerned about the accessibility of financing given the fact that Octagon is a highly leveraged company with net debt of RM177 million, equivalent to 2.3 times net gearing. Assuming a funding structure of 60% equity and 40% debt for this project, Octagon is expected to fork out additional RM195 million cash, putting further pressure on its balance sheet. Credit risk for the project owner is also high, in our opinion.
The contract between ORE and KNM is subject to the signing of a definitive agreement, pending the financial close (needs to be secured by December 2011). KNM also revealed in the announcement that one of the risks is that the project may not achieve its financial close. Hence, we are making no change to our forecasts.
We maintain 'neutral' with unchanged target price of RM1.22. Our target price is derived from eight times 2012 price-earnings ratio, which is slightly higher than one standard deviation below its five-year historical multiple of 5.7 times.
Recall that we reduced our earnings forecast by 20% recently, after factoring in the fact that we have now excluded the Peterborough project in our forecasts. Securing the financing for WTE and Peterborough projects are strong re-rating catalysts for KNM. A knee-jerk reaction as a result of this sizeable EPCC contract announcement, which we are generally neutral on, is possible. ' MIDF Research, Oct 12
This article appeared in The Edge Financial Daily, Ocotber 13, 2011.
Company Name: KNM GROUP BHD
| Research House: MIDF | Price Call: HOLD | Target Price: 1.22 |
KNM Group Bhd
(Oct 12, RM1.30)
Maintain neutral at RM1.22 with target price of RM1.22: KNM announced yesterday that it has secured a conditional turnkey engineering, procurement, construction and commissioning (EPCC) contract for a waste to energy (WTE) plant worth US$200 million (approximately RM628 million) from Orizon Renewable Energy (Pte) Ltd (ORE), an indirect 51%-owned subsidiary of Octagon Consolidated Bhd. To note, earlier last week KNM was also awarded a RM70 million contract by Octagon to manufacture an advanced thermal gasification reactor.
The WTE plant is a public private partnership project between ORE and the Waste Management Authority of Western Province, an agency under the government of Sri Lanka. The plant, which will be located in Karadiyana, Thumbowila, Kesbewa, Colombo, Sri Lanka, has the capacity to process up to 1,000 tonnes per day of municipal solid waste and generate a minimum of 40MW of electricity.
Should the EPCC contract be finalised, KNM's order backlog is expected to increase to between RM3.5 billion and RM3.8 billion (excluding the RM2.2 billion Peterborough project). We understand that the construction of the WTE plant is expected to start in 2Q12 and be completed in 2Q14.
We understand that ORE has received the government's approval to build-own-operate the WTE plant. The ground-breaking ceremony was held last week. The electricity will be sold to Ceylon Electricity Board, the Sri Lanka state-owned electricity company. Hence, we reckon the government is committed to this project.
However, we are concerned about the accessibility of financing given the fact that Octagon is a highly leveraged company with net debt of RM177 million, equivalent to 2.3 times net gearing. Assuming a funding structure of 60% equity and 40% debt for this project, Octagon is expected to fork out additional RM195 million cash, putting further pressure on its balance sheet. Credit risk for the project owner is also high, in our opinion.
The contract between ORE and KNM is subject to the signing of a definitive agreement, pending the financial close (needs to be secured by December 2011). KNM also revealed in the announcement that one of the risks is that the project may not achieve its financial close. Hence, we are making no change to our forecasts.
We maintain 'neutral' with unchanged target price of RM1.22. Our target price is derived from eight times 2012 price-earnings ratio, which is slightly higher than one standard deviation below its five-year historical multiple of 5.7 times.
Recall that we reduced our earnings forecast by 20% recently, after factoring in the fact that we have now excluded the Peterborough project in our forecasts. Securing the financing for WTE and Peterborough projects are strong re-rating catalysts for KNM. A knee-jerk reaction as a result of this sizeable EPCC contract announcement, which we are generally neutral on, is possible. ' MIDF Research, Oct 12
This article appeared in The Edge Financial Daily, Ocotber 13, 2011.
ECM Libra Research maintains Trading Buy on KNM
Stock Name: KNM
Company Name: KNM GROUP BHD
KUALA LUMPUR: ECM Libra Equities Research is maintaining its trading buy call on KNM GROUP BHD [] with a target price of RM1.72 based on a 1.0 times price-to-book value is unchanged.
It said on Wednesday, Pct 12 that KNM Group secured another contract from Octagon Consolidated, this time worth some RM638 million to build a renewable energy plant in Sri Lanka.
'While the project still awaits its financial close, with the backing of the Sri Lankan Government we believe achieving financial close could be less of a concern as compared to the UK biomass project,' it said.
ECM Libra Research said it is maintaining a Trading Buy call as KNM is already trading at trough valuation despite concerns about its margin and potential further delay in the UK biomass project.
Company Name: KNM GROUP BHD
| Research House: ECMLIBRA | Price Call: TRADING BUY | Target Price: 1.72 |
KUALA LUMPUR: ECM Libra Equities Research is maintaining its trading buy call on KNM GROUP BHD [] with a target price of RM1.72 based on a 1.0 times price-to-book value is unchanged.
It said on Wednesday, Pct 12 that KNM Group secured another contract from Octagon Consolidated, this time worth some RM638 million to build a renewable energy plant in Sri Lanka.
'While the project still awaits its financial close, with the backing of the Sri Lankan Government we believe achieving financial close could be less of a concern as compared to the UK biomass project,' it said.
ECM Libra Research said it is maintaining a Trading Buy call as KNM is already trading at trough valuation despite concerns about its margin and potential further delay in the UK biomass project.
October 10, 2011
KNM Group: Peterborough project delayed
Stock Name: KNM
Company Name: KNM GROUP BHD
KNM Group Bhd
(Oct 10, RM1.20)
Maintain underperform with fair value of 70 sen: Last week, KNM announced that it had been prompted by its client that the financial close of its UK Peterborough contract (worth RM2.2 billion) has been delayed to December.
As such, the company believes it will be unable to meet its guided FY11 revenue of RM2.2 billion and earnings before interest, taxes, depreciation, and amortisation (Ebitda) earnings of RM270 million.
The project involves the development of a biomass and waste recycling centre in the UK using high-end technology. KNM was awarded the engineering, procurement and construction (EPC) contract on Dec 21, 2010.
We are not surprised by the announcement as we have noted that the project had yet to achieve financial close by August. The management had previously guided that it would likely be achieved in early 2HFY11.
As such, we had postponed the project's earnings contribution to FY12 in our previous note (dated Aug 23, 2011).
We reiterate our view that the stock will likely continue to report disappointing earnings. Moreover, it has significant exposure to Europe and the UK, which are at high risk of economic slowdown.
As such, we foresee continual volatility in its forward earnings despite its order backlog of RM5.3 billion (of which half is made up of the Peterborough project).
We estimate that the Peterborough contract accounts for around 80% of our core FY12 earnings per share (EPS).
However, this is based on conservative assumptions that the company secures minimal new wins beyond the project within FY12 and Ebitda margins grow by one percentage point to 9.5% (from our 8.5% assumption for FY11).
We maintain our FY11 to FY13 earnings estimates as we had already assumed: (i) the project would kick start in FY12; and (ii) lower than guided revenue and Ebitda earnings of RM1.98 billion and RM168.5 million respectively for FY11.
However, we are removing our FY11 dividend per share assumption of two sen, as we believe the company is unlikely to pay a dividend under such difficult conditions.
Upside risks to our view include: (i) better than expected margins for contracts executed in the latter part of FY11; and (ii) higher than expected contract wins moving ahead which will significantly increase revenue earnings.
The stock has continued to negatively surprise the market, reinforcing our view that the stock deserves to trade at a discount to sector peers. We maintain our fair value of 70 sen per share based on nine times FY12 price earnings ratio. ' RHB Research, Oct 10
This article appeared in The Edge Financial Daily, Ocotber 11, 2011.
Company Name: KNM GROUP BHD
| Research House: RHB | Price Call: SELL | Target Price: 0.70 |
KNM Group Bhd
(Oct 10, RM1.20)
Maintain underperform with fair value of 70 sen: Last week, KNM announced that it had been prompted by its client that the financial close of its UK Peterborough contract (worth RM2.2 billion) has been delayed to December.
As such, the company believes it will be unable to meet its guided FY11 revenue of RM2.2 billion and earnings before interest, taxes, depreciation, and amortisation (Ebitda) earnings of RM270 million.
The project involves the development of a biomass and waste recycling centre in the UK using high-end technology. KNM was awarded the engineering, procurement and construction (EPC) contract on Dec 21, 2010.
We are not surprised by the announcement as we have noted that the project had yet to achieve financial close by August. The management had previously guided that it would likely be achieved in early 2HFY11.
As such, we had postponed the project's earnings contribution to FY12 in our previous note (dated Aug 23, 2011).
We reiterate our view that the stock will likely continue to report disappointing earnings. Moreover, it has significant exposure to Europe and the UK, which are at high risk of economic slowdown.
As such, we foresee continual volatility in its forward earnings despite its order backlog of RM5.3 billion (of which half is made up of the Peterborough project).
We estimate that the Peterborough contract accounts for around 80% of our core FY12 earnings per share (EPS).
However, this is based on conservative assumptions that the company secures minimal new wins beyond the project within FY12 and Ebitda margins grow by one percentage point to 9.5% (from our 8.5% assumption for FY11).
We maintain our FY11 to FY13 earnings estimates as we had already assumed: (i) the project would kick start in FY12; and (ii) lower than guided revenue and Ebitda earnings of RM1.98 billion and RM168.5 million respectively for FY11.
However, we are removing our FY11 dividend per share assumption of two sen, as we believe the company is unlikely to pay a dividend under such difficult conditions.
Upside risks to our view include: (i) better than expected margins for contracts executed in the latter part of FY11; and (ii) higher than expected contract wins moving ahead which will significantly increase revenue earnings.
The stock has continued to negatively surprise the market, reinforcing our view that the stock deserves to trade at a discount to sector peers. We maintain our fair value of 70 sen per share based on nine times FY12 price earnings ratio. ' RHB Research, Oct 10
This article appeared in The Edge Financial Daily, Ocotber 11, 2011.
October 4, 2011
HDBSVR maintains Hold on KNM Group, TP RM1.35
Stock Name: KNM
Company Name: KNM GROUP BHD
KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) is maintaining its Hold call on KNM GROUP BHD [] at RM1.17 and target price of RM1.35.
It said on Tuesday, Oct 4 that KNM had secured a RM70 million contract from Octagon Consolidated Berhad to manufacture an advanced thermal gasification reactor (ATGR) for a waste-to-energy plant in Colombo, Sri Lanka.
KNM was also short-listed as one of the contractors for the engineering, procurement, CONSTRUCTION [] and commissioning (EPCC) contract for the plant.
'We estimate the group's outstanding order book remains in excess of RM5 billion. We maintain our forecast at this juncture as we remain concerned on KNM's slow margin recovery, which has severely eroded its profitability despite a relatively strong outstanding order book,' it said.
Company Name: KNM GROUP BHD
| Research House: HWANGDBS | Price Call: HOLD | Target Price: 1.35 |
KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) is maintaining its Hold call on KNM GROUP BHD [] at RM1.17 and target price of RM1.35.
It said on Tuesday, Oct 4 that KNM had secured a RM70 million contract from Octagon Consolidated Berhad to manufacture an advanced thermal gasification reactor (ATGR) for a waste-to-energy plant in Colombo, Sri Lanka.
KNM was also short-listed as one of the contractors for the engineering, procurement, CONSTRUCTION [] and commissioning (EPCC) contract for the plant.
'We estimate the group's outstanding order book remains in excess of RM5 billion. We maintain our forecast at this juncture as we remain concerned on KNM's slow margin recovery, which has severely eroded its profitability despite a relatively strong outstanding order book,' it said.
September 6, 2011
Affin Research downgrades KNM, Bumi Armada
Stock Name: KNM
Company Name: KNM GROUP BHD
KUALA LUMPUR: Affin Investment Bank Research is downgrading KNM GROUP BHD [] to Sell from Reduce with a lower target price of RM1.05 from RM1.32.
The research house said on Tuesday, Sept 6 the lower target price was based on its 20% to 41% FY11-13 earnings cuts in view of the challenging operating environment, weak and volatile profit margin trend.
Affin Research also downgraded Bumi Armada to ADD (from BUY) with an unchanged TP of RM3.78 following its strong share price performance.
It also rolled over Petronas Chemicals' valuation window to CY12 and lowered TP to RM7.50 (from RM8.70) based on 15x CY12 earnings (from 19x CY11 earnings).
The research house also cut Perdana Petroleum's FY11-13E EPS forecast by 14%-46% and lowered its TP to RM1.09 (based on 1x FY11E book value) from RM1.32 (1.2x FY11E book value).
As for Petra Energy, it reduced the TP to RM1.80 (from RM1.89) following a 2%-13% cut in its FY11-13 EPS forecast.
Company Name: KNM GROUP BHD
| Research House: AFFIN | Price Call: SELL | Target Price: 1.05 |
KUALA LUMPUR: Affin Investment Bank Research is downgrading KNM GROUP BHD [] to Sell from Reduce with a lower target price of RM1.05 from RM1.32.
The research house said on Tuesday, Sept 6 the lower target price was based on its 20% to 41% FY11-13 earnings cuts in view of the challenging operating environment, weak and volatile profit margin trend.
Affin Research also downgraded Bumi Armada to ADD (from BUY) with an unchanged TP of RM3.78 following its strong share price performance.
It also rolled over Petronas Chemicals' valuation window to CY12 and lowered TP to RM7.50 (from RM8.70) based on 15x CY12 earnings (from 19x CY11 earnings).
The research house also cut Perdana Petroleum's FY11-13E EPS forecast by 14%-46% and lowered its TP to RM1.09 (based on 1x FY11E book value) from RM1.32 (1.2x FY11E book value).
As for Petra Energy, it reduced the TP to RM1.80 (from RM1.89) following a 2%-13% cut in its FY11-13 EPS forecast.
August 23, 2011
KNM's 2QFY11 a let-down
Stock Name: KNM
Company Name: KNM GROUP BHD
KNM Group Bhd
(Aug 23, RM1.44)
Downgrade to hold at RM1.48 with revised target price of RM1.35 (from RM2.10): KNM reported 2QFY11 net profit of RM10.9 million (-43% quarter-on-quarter [q-o-q], -23% year-on-year [y-o-y]), the lowest since 4QFY09 losses, disappointing our already low expectations. This was despite higher revenue, growing 32% q-o-q and 42% y-o-y to RM544 million which implies slow margin recovery, possibly due to poor execution. Earnings before interest and tax (Ebit) margins have been dropping over the last few quarters, to 2.7% in 2QFY11 (4.1% in 1QFY11, 5.3% in 4QFY10). We suspect margins may take longer to normalise and recover to decent 2007/08 levels of 18% to 20%.
While KNM's outstanding order book is still hovering at RM5.5 billion, the company seems unlikely to translate it into strong earnings recovery in FY11, judging by its poor 2QFY11 results. But its RM3.3 billion order book, excluding the RM2.2 billion Peterborough project, may still provide earnings visibility in FY12. Net gearing remained healthy at 30% in June this year.
We revise down FY11 to FY13F earnings by between 23% and 34% after imputing higher operating expenses on the back of slow margin recovery. Likewise, we trim our target price to RM1.35, pegged to 10 times FY12 earnings per share, similar to the sector average. We downgrade KNM to 'hold' following the earnings and target price cuts.
A potential catalyst for the stock would be normalisation of project margins, which have severely eroded its profitability despite a relatively strong outstanding order book. ' HwangDBS Vickers Research, Aug 23
This article appeared in The Edge Financial Daily, August 24, 2011.
Company Name: KNM GROUP BHD
| Research House: HWANGDBS | Price Call: HOLD | Target Price: 1.35 |
KNM Group Bhd
(Aug 23, RM1.44)
Downgrade to hold at RM1.48 with revised target price of RM1.35 (from RM2.10): KNM reported 2QFY11 net profit of RM10.9 million (-43% quarter-on-quarter [q-o-q], -23% year-on-year [y-o-y]), the lowest since 4QFY09 losses, disappointing our already low expectations. This was despite higher revenue, growing 32% q-o-q and 42% y-o-y to RM544 million which implies slow margin recovery, possibly due to poor execution. Earnings before interest and tax (Ebit) margins have been dropping over the last few quarters, to 2.7% in 2QFY11 (4.1% in 1QFY11, 5.3% in 4QFY10). We suspect margins may take longer to normalise and recover to decent 2007/08 levels of 18% to 20%.
While KNM's outstanding order book is still hovering at RM5.5 billion, the company seems unlikely to translate it into strong earnings recovery in FY11, judging by its poor 2QFY11 results. But its RM3.3 billion order book, excluding the RM2.2 billion Peterborough project, may still provide earnings visibility in FY12. Net gearing remained healthy at 30% in June this year.
We revise down FY11 to FY13F earnings by between 23% and 34% after imputing higher operating expenses on the back of slow margin recovery. Likewise, we trim our target price to RM1.35, pegged to 10 times FY12 earnings per share, similar to the sector average. We downgrade KNM to 'hold' following the earnings and target price cuts.
A potential catalyst for the stock would be normalisation of project margins, which have severely eroded its profitability despite a relatively strong outstanding order book. ' HwangDBS Vickers Research, Aug 23
This article appeared in The Edge Financial Daily, August 24, 2011.
Looking to a better 2H11
Stock Name: KNM
Company Name: KNM GROUP BHD
Company Name: KNM GROUP BHD
| Research House: ECMLIBRA | Price Call: TRADING BUY | Target Price: 2.25 |
KNM down in active trade on lower 1H earnings
Stock Name: KNM
Company Name: KNM GROUP BHD
KUALA LUMPUR: KNM GROUP BHD []'s shares were actively traded and fell on Tuesday, Aug 23 after its net profit for the second quarter ended June 30, 2011 fell 23.2% to RM10.86 million from RM14.14 million a year earlier, due to slower improvement in capacity utilisation in certain operating unit.
At 9.50am, KNM fell two sen to RM1.46 with 3.97 million shares done.
Revenue for the quarter rose to RM544.30 million from RM383.21 million in 2010 due to higher revenue recognition. Earnings per share was 1.11 sen while net assets per share was RM1.83.
For the six months ended June 30, KNM's net profit fell 45.1% to RM29.87 million from RM54.48 million in 2010, on the back of revenue RM957.30 million.
Maybank IB Research on Aug 23 downgraded KNM to Sell, and cut its target price to RM1.19 (from RM2).
The research house said KNM's 1H results were a letdown, prompting it to cut 2011-13 earnings by up to 64% p.a..
While KNM delivered on topline, bottomline was a disappointment, felled by cost overruns and high operating expenses, its aid.
'While the share price has underperformed by 48% YTD, we expect performance to be further suppressed.
'There is no sign of an operating recovery and cost control is absent. Further, valuations are expensive now," it said in a note.
''
Company Name: KNM GROUP BHD
| Research House: MAYBANK | Price Call: SELL | Target Price: 1.19 |
KUALA LUMPUR: KNM GROUP BHD []'s shares were actively traded and fell on Tuesday, Aug 23 after its net profit for the second quarter ended June 30, 2011 fell 23.2% to RM10.86 million from RM14.14 million a year earlier, due to slower improvement in capacity utilisation in certain operating unit.
At 9.50am, KNM fell two sen to RM1.46 with 3.97 million shares done.
Revenue for the quarter rose to RM544.30 million from RM383.21 million in 2010 due to higher revenue recognition. Earnings per share was 1.11 sen while net assets per share was RM1.83.
For the six months ended June 30, KNM's net profit fell 45.1% to RM29.87 million from RM54.48 million in 2010, on the back of revenue RM957.30 million.
Maybank IB Research on Aug 23 downgraded KNM to Sell, and cut its target price to RM1.19 (from RM2).
The research house said KNM's 1H results were a letdown, prompting it to cut 2011-13 earnings by up to 64% p.a..
While KNM delivered on topline, bottomline was a disappointment, felled by cost overruns and high operating expenses, its aid.
'While the share price has underperformed by 48% YTD, we expect performance to be further suppressed.
'There is no sign of an operating recovery and cost control is absent. Further, valuations are expensive now," it said in a note.
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