KNM keen to add two more plants

KUCHING: KNM Group Bhd (KNM) is looking at adding two more plants to extend its market reach and broaden its operations.

SOURCE: HwangDBS Research

According to HwangDBS Vickers Research Sdn Bhd (HwangDBS Research), the company currently had 21 plants, three engineering offices and one technology processing centre across 14 countries.

The research house said the two plants on the radar of KNM were in Central Asia and South Africa and expected the consideration for each plant to be approximately RM40 million. It added that KNM would most likely pursue the acquisitions via joint ventures (JVs) with local partners.

In other developments, the company had expanded its Saudi Arabia capacity, bringing group total capacity to 157,300 metric tonnes (mt) a year.

Furthermore, KNM planned to transfer some works done in Europe back to its Kuantan plant to capitalise on the RM1.4 billion tax incentive granted for the acquisition of Borsig GmbH (Borsig), in addition to lowering overall production fixed cost.

The research firm said that KNM was spending approximately RM25 million to set up a plant to manufacture Borsig’s boilers for the global market.

There was also a plan to package Borsig’s membrane equipment in Malaysia that could cater to its Asia Pacific clients.

To recap, KNM had secured RM1 billion worth of jobs so far, with the latest being the five work orders worth RM288.8 million secured by its three wholly-owned subsidiaries; KNM Process Systems, FBM Hudson and Borsig, HwangDBS Research pointed out.

Comparatively, KNM managed to secure only around RM1.5 billion worth of contracts in 2009.

The research house concurred that the contract flow had improved and the latest wins brought KNM’s current order book to a year-high of RM2.4 billion compared with RM1.8 billion at the beginning of the year.

The RM400 million Verwater contract had been excluded from its order book computation because it was currently put on hold by the client, who had yet to secure financing for the project.

In line with the oil and gas (O&G) sector improving gradually, HwangDBS Research viewed this as a positive development for KNM as the O&G and petrochemical industries typically accounted for more than half of KNM’s revenue.

KNM’s average selling price (ASP) had also improved moderately to nearly RM20,000 per mt from a low of RM18,000 per mt in 2009.

KNM currently has a RM14 billion tender book and is eyeing several sizable contracts in Southeast Asia and Europe. Using the company’s strong cash balance of RM496.7 million as at the first quarter of 2010 as an indicator, the research house stated KNM’s target price at RM0.55 per share.


By Borneo Post