Wednesday, December 22, 2010

KNM to continue uptrend: AmResearch

KNM Group Bhd's share price is expected to continue to outperform the group's vastly improved earnings prospects, underpinned by a faster pace of new contract awards. 
AmResearch in a note today said, KNM's share price had risen by 59 per cent, since it upgraded the group to a "buy" last week.

"The strong price performance has largely been driven by local investors as foreign holdings have remained around 21-22 per cent over the past few months against the 18 per cent earlier this year," it added.

As news flow in new orders gains traction, AmResearch said it has raised the new order book assumption on KNM Group Bhd to RM3 billion-RM3.2 billion from RM2.6 billion-RM2.8 billion for the financial year ending 2011-2012.

The research house said this is in line with KNM's target based on a success rate of 20 per cent on its tender value.

"Note that our revised order book has not taken into account the UK biomass project.

"But assuming this project commences in early January next year, we estimate that FY11F net profit, could be enhanced by 20 per cent," AmResearch added, in a research note today.

The newly secured RM2.196 billion EnergyPark Peterborough project is expected to boost KNM Group Bhd's outstanding order book by 90 per cent to RM4.6 billion.

While high-end process equipment would be required, AmResearch said that the pre-tax margin could be around 20 per cent given that KNM is the main contractor for the biomass project, which will be involve sub-contracting some of the jobs to other players. -- Bernama

Source: Bernama, 22 Decem 2010

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