RHB Research cautious on KNM’s earnings outlook (7164)

KUALA LUMPUR: RHB Research Institute prefers to remain cautious on KNM Group's earnings outlook and is keeping its Market Perform call on the stock.
“Our fair value of 74 sen is based on 0.4 times FY13 P/BV,” it said on Tuesday.
RHB
Research said Borsig's compressor business, housed under Borsig ZM
Compression (BZM), is expected to be one of the key drivers for its
topline growth moving forward. It said the management expected Borsig's
valuations to fall within the range of 11-14 times forward PER, in line
with its current regional O&G peers.
The research house said
this would imply a market capitalisation for Borsig, post-IPO, of
approximately RM1.7bil to RM2.1bil, based on FY13 earnings estimate of
RM150mil. “At a valuation of RM1.8bn, Borsig's value to KNM's
shareholders would stand at RM1.21 per share (post-enlarged share
capital owing to KNM's rights issue), which implies a significant
upside to KNM's current share price,” said RHB Research.