AmResearch is maintaining its SELL call on KNM with unchanged fair value of 42 sen per share.
It said on Friday, July 9 the valuation was based on a FY10F PE of 12 times - at 15% discount to the stock's three-year average of 14 times.
On Thursday, KNM said its units had secured contracts worth RM289 million from June 24 until now.
AmResearch said including these new projects, KNM has secured RM1 billion in new orders for FY10F to date with a target to secure another RM1 billion by year-end.
“Assuming 2QFY10F revenue of RM400 million, we estimate that KNM's outstanding order book could rise from RM1.7 billion to RM1.9 billion currently (excluding the RM500 million Verwater oil storage terminal project in Yan, Kedah which has yet to secure financing arrangements).
“The group's tender book has risen from RM14 billion to RM17 billion (excluding the Sabah Oil & Gas Terminal project in Kimanis). KNM trades at a premium FY10F PE of 14 times compared to its peers' 10x. We think that this is unjustified given that a major portion of the group's FY10F earnings stem from a Borsig deferred tax writeback,” it said.
Written by AmResearch
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