Thursday, November 24, 2011

KNM extends losses in active trade

KUALA LUMPUR (Nov 24): KNM GROUP BHD [] shares continued to fall on Thursday after its dismal third quarter losses prompted analysts to downgrade the stock a day earlier.

At 9.20am, KNM fell 11 sen to RM1.01 with 8.06 million shares traded.

KNM had posted net loss RM116.29 million for third quarter ended Sept 30, 2011 compared to net profit RM56.09 million a year earlier, due mainly to one off provision for foreseeable losses and credit impairments.

The company said on Nov 22 that revenue for the quarter rose 6.41% to RM445.18 million from RM418.36 million in 2010.

MIDF Research yesterday downgraded KNM to Sell from Neutral with a lower target price of 85 sen (from R1.22), ascribing a lower targeted PER12 of 7x (from 8x), which is 1-std deviation below its 5-year historical multiple.

'The management also surprisingly announced a dividend policy of distributing at least 50% of its net profit.

'This appears like a desperate act to try to stem selling pressure expected after the huge loss in 3QFY11,' the research house said on Wednesday.

Meanwhile, Maybank IB Research said on Nov 23 that KNM's RM116 million net loss in 3Q11, which was due to operating impairments and provisions totaling RM150 million, wiped out 1H's net profit of RM30 million and validates our concerns on cost management.

'We now expect 2011 to be in the red, on expectation that losses should extend into 4Q. We also cut 2012-13 net profit forecasts by 33%-54% on lower EBIT margin assumptions.

'Following this, we downgrade target price to RM1.08 (-9%) based on a lower PER multiple of 8 times as we roll over our valuations to 2013 (previously 10x 2012 earnings),' it said.


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