by winston » Wed Oct 01, 2014 12:01 pm
vested
August 8, 2014
KNM to get slice of Pengerang job, eyeing work worth RM1bil
BY NG BEI SHAN
PETALING JAYA: Shares in KNM Group Bhd climbed after the company said it will get a slice of the US$1.33bil (RM4.26bil) contract for an oil refining and petrochemical engineering project at the Pengerang Integrated Complex in Johor.
A source told StarBiz that the process equipment fabrication specialist was eyeing for work worth at least RM1bil from the project.
“KNM’s slice of the pie could be valued at between US$300mil (RM963mil) and US$360mil,’’ the source said.
KNM told the stock exchange yesterday that the engineering, procurement, construction and commissioning (EPCC) package was awarded by PRPC Refinery And Cracker Sdn Bhd, a unit of Petroliam Nasional Bhd, to Sinopec Engineering Group Co Ltd.
The letter of award was received by Sinopec on July 25.
“KNM Process System Sdn Bhd (KNMPS) has been co-operating with Sinopec on the bidding process and it has been agreed that KNMPS is a selected subcontractor to Sinopec for the execution of the contract,’’ it said.
“The relevant parties are in the process of finalising and executing the contract,’’ the company said.
KNM shares jumped as much as 9.7% in early trade. The stock ended the day at RM1.09, up five sen, or 4.8%, from its previous close as trading volume swelled to 38.22 million shares.
Its warrants topped the active trading list with 47.65 million transacted. They closed 1.5 sen higher each at 40 sen.
The contract awarded in Pengerang, which is the location of Petronas’ Refinery and Petrochemical Integrated Development (Rapid) project, could spur a further re-rating on the stock.
Maybank IB Research said yesterday it was reviewing its RM1 target price for the stock.
“We expect KNM to bag US$1bil (RM3.21bil) worth of Rapid–related contracts, spread over three years,” it said.
Under a blue-sky scenario, the research house said KNM’s target price and earnings could be lifted by 50% if it managed to secure Rapid jobs worth US$1bil.
In a sector update yesterday, Hong Leong Investment Bank (HLIB) Research pointed out the potential of more EPCC jobs being dished out in the third quarter.
“We understand that bidding is ongoing for a total five packages for refinery plant followed by petrochemical complex and liquefied natural gas regasification plant,” said the research unit.
The firm said Rapid was estimated to cost about US$16bil (RM52.5bil) while the associated facilities will involve an investment of about US$11bil (RM36.1bil).
HLIB Research recommended KNM with a target price of RM1.35 as top pick for investors seeking exposure to the Rapid theme.
Source: The Star
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