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| KNM Group 1H09 within expectations but analysts’ views still mixed |
| Written by Financial Daily | |||
| Tuesday, 01 September 2009 11:02 | |||
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Last week, the group posted a 12.9% growth in net profit to RM169.9 million on revenue growth of 3.7% to RM964.7 million for 1HFY09. Views remain mixed on the stock with analysts’ calls ranging from buy, hold and sell. Of the 10 research houses covering the stock all maintained their calls except for Kenanga Investment Bank, which upgraded its call on the company’s stock to hold. OSK Research, which maintains a buy call on the counter said in a report last Friday, that although the slower order book replenishment had to some extent affected the company since it usually recognises about 10% to 15% of a project’s value upon receiving it, the research house was surprised by the reasonableness of the first half of the financial year. On top of that, the broker expects the second half to be better for the company.  “We understand that new orders have progressively returned of late and based on our observations, the Gebeng and Kuantan Port plants we visited recently had been so busy that they were utilising more than 70% of the space in their open yard,” the report said adding that the number of KNM’s workers had doubled since the middle of last year. OSK Research has a price target of RM1.01 for the counter based on a price earnings ratio of 10 times financial year ending Dec 31, 2010 (FY10). The broker continues to like the company for its global presence and its capability to produce even more high-end equipment after the acquisition of Borsig. Also, as at June 2009, its order book and tender book were a robust RM2.8 billion and RM14 billion respectively, it said. RHB Research on the other hand, which maintains an underperform call on KNM, expressed concern about the company’s order book in the medium term. “We reserve some caution on KNM’s ability to secure enough new jobs for FY10. We estimate that in order to meet its FY10 earnings projection, the company will need to secure RM1 billion to RM1.5 billion worth of new jobs in the second half of FY09, which implies two to three times the jobs secured in 1HFY09,” RHB Research said in a report last Friday. It added that competition for higher margin jobs was likely to intensify going forward given the slowing number of oil and gas jobs over the near term, “hence driving down margin”. RHB Research has a fair value of 78 sen for the counter based on 11 times prices earnings ratio of FY10 earnings estimates. This article appeared in The Edge Financial Daily, September 1, 2009.
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