Hot Stock KNM among top traded on Hong Leong’s initiation report

by **Cals** Wed 02 Jul 2014, 23:24

Hot Stock KNM among top traded on Hong Leong’s initiation report

Business & Markets 2014

Written by Jeffrey Tan of theedgemalaysia.com

Wednesday, 02 July 2014 14:51

KUALA LUMPUR (July 2): KNM Group Bhd's shares were among the top traded on the stock exchange today after Hong Leong Investment Bank Research initiated coverage on the stock with a “buy” call and target price (TP) of RM1.35.

At 2.38 pm today, KNM gained 4.5 sen or 5% to 95 sen. The seventh most active counter saw trades of 27.5 million shares. It had earlier hit a high of 95.5 sen.

In his report today, Hong Leong IB research analyst Jason Tan Yat Teng expects KNM to bag a total of RM2.2 billion contracts as the firm is one of the main beneficiaries for the RAPID project.

“With assumption of 12% market share, we expect the firm to bag RM54 million per annum based on contract duration of four years,” he said, noting these made up 85% of KNM’s FY13 Asia and Oceania revenue.

According to Tan, he expects KNM’s net profit to grow at a stronger pace with compounded annual growth rate of 74% from FY13 to FY16 as EBITDA margin is projected to improve to 11.7% from 10%.

He said the balance sheet was expected to improve further with KNM’s net gearing falling to 0.16 time in FY16 from 0.33 time in FY13.

On the construction of EnergyPark Peterborough that KNM expects will commence in the fourth quarter, Tan deemed it a “game changer”, adding earnings contribution is expected to flow in FY17.

“We expect Phase 1 to generate around RM40 million to the company’s bottomline,” he said.

He added Phase 1 may add another 39 sen of net asset value per share to his TP of RM1.35.

Furthermore, Tan said the potential relisting of Borsig in the next few years might give better value to KNM.

Separately, Kenanga Research in a note today said KNM would see immediate technical support and resistance levels at 90 sen and 92 sen respectively.