KNM to float Borsig on SGX next year

KUALA LUMPUR: KNM Group Bhd plans to seek shareholders’ approval to list its wholly owned Borsig Beteiligungsverwaltungsgesellschaft mbH on the Singapore Exchange next year.

In a statement yesterday, KNM said it expects Borsig to fetch an indicative valuation of RM1.8 billion to RM1.9 billion, not much above the RM1.7 billion it paid for the company 4½ years ago.

In February 2008, KNM paid €350 million for Borsig, a German company whose units develop, manufacture, install and maintain plants and processing equipment in the chemical, petrochemical, oil and gas, power and industrial services industries. At the time, the ringgit was going for 4.77 to the euro. Today, the exchange rate is RM3.93 for €1.

At the time, KNM group managing director Lee Swee Eng had reportedly described Borsig as a crown jewel and said KNM could greatly expand its order book by leveraging on Borsig’s strength and presence in Europe and the Middle East. KNM’s business was mostly done in Asia.

United Overseas Bank Ltd has been appointed sole manager, underwriter and placement agent for the proposed Singapore floatation.

It remains to be seen just how much favour KNM can win back with its proposal.

KNM lost favour with investors last year following surprise one-off provisions that caused earnings to fall substantially short of analysts’ expectations.

In spite of a sizeable order book of some RM5 billion then, analysts saw uncertainties over additional potential provisions, thinning margins as well as possible work delays on contracts awarded to downgrade the stock.

A substantial portion of the order book comprised a €450 million (RM1.77 billion) engineering, procurement, construction and commissioning contract for a biomass and waste recycling centre project in England. The job was awarded by Peterborough Renewable Energy Ltd.

KNM added three sen or 4.76% to close at 66 sen yesterday, down 33% year-to-date. Over the past three weeks, the stock has gained 15.8% from its recent low of 57 sen on Aug 15.

Of the eight brokerage houses that updated recommendations this month, TA Securities is the only one with a “buy”, valuing KNM at RM1.11 apiece. Four are “neutral” while three have a “sell”, with the lowest target price being 50 sen, Bloomberg data showed.

This article is appeared in The Edge Financial Daily on 7 September, 2012.

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