KNM in active trade after announcing contract wins

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KUALA LUMPUR (April 10): KNM Group Bhd was among the top actives on the bourse during the morning trading session, after the group announced contract wins worth US$56.67 million (RM206.3 million).

At 10.46am, KNM rose 1.5 sen or 2.4% to 64.5 sen, with some 16.9 million shares exchanged. It had earlier risen as much as 2 sen or 3.2% to reach a high of 65 sen.

In a filing yesterday, KNM (fundamental: 0.85; valuation: 1.8) said it secured three projects from Japan’s Toyo Group and Spanish-based Tecnicas Reunidas Group.

KNM’s wholly-owned unit, KNM Process Systems Sdn Bhd, was awarded a US$33.53 million contract by Toyo Group to supply columns, reactors, drums and tanks for the Pengerang Integrated Petroleum Complex Project in Johor.

The group also won a US$15.17 million contract from Tecnicas Reunidas Group to supply reactors, columns and pressure vessels for the same project.

Its third contract valued at US$7.97 million involves supplying towers to Toyo Engineering Corp of Japan for the Turkmengas Petrochemical Complex project in Turkmenistan.

In a note today, Hong Leong Investment Bank Bhd (HLIB) said it views the contract wins positively, reiterating KNM’s position as one of the main beneficiaries of the Refinery and Petrochemical Integrated Development (RAPID) project as it is among the largest process equipment manufacturer.

“With the RAPID project proceeding, we expect to see continuous contract newsflow. We understand that KNM has a good chance to secure more subcontractor jobs from some refinery package in the near term,” said HLIB.

It added that the group is also bidding for sub-contracts for other packages relating to refinery plants and engineering, procurement, construction and commissioning (EPCC) contracts for tank farms and other associated facilities.

Meanwhile, KNM’s 40:60 joint venture with Korea-based Hansol will be bidding for biomass projects in Malaysia, with contract values ranging between RM100 million and RM300 million.

“We understand there are numerous tenders for biomass projects. Together with UK Peterborough biomass project, we expect to see significant contribution of income from recurring renewable energy division in the future,” said HLIB.

The research house maintained its “buy” call on KNM with an unchanged target price of 88 sen.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)