KNM aims for RM3.4bil in new orders

Thursday June 30, 2011

By Leong Hung Yee 

SERI KEMBANGAN: KNM Group Bhd, which has an order backlog of RM5.5bil, expects to secure at least 20% of the RM17bil worth of projects it is tendering, according to executive chairman/CEO Lee Swee Eng.

“Based on our track record, we have a success rate of 25% to 30% in 2008. However, in the past two years the market has become increasingly competitive and our success rate now is about 20%. With 20%, we have a prospect of adding RM3.4bil in new orders,” he told reporters after its AGM yesterday.

He said last year its tenderbook stood at RM11bil and the company was “bidding projects everyday”.
Lee said more than 90% of its order backlog of RM5.5bil were from overseas and would only be reflected on account gradually. He explained that 2009 projects were only reflected in its account last financial year ended Dec 31, 2010 (FY10).

On its prospect for the current FY11, Lee said the company was expecting a “better year” than last year as its large order book would support long term earnings visibility. “The market has rebounded and oil prices are in the range of US$90 a barrel. There are more activities (in the oil and gas industry),” he said.

Lee said that its previous projects were mainly between 12- and 18-month jobs but it was not looking at providing total solutions for clients as those jobs would be two to four years.

“The visibility is better. We are looking at improving out margin. Selling process equipment alone is very tough as the market is becoming more competitive now,” he added. KNM reported a net profit of RM19mil in the first quarter to March 31, 2011 against RM40.3mil a year ago. Revenue, however was higher at RM413mil in the first quarter to March 31, 2010 versus RM373.3mil previously.

The poor numbers were affected by a case of low-margin older backlog orders.

To a question, Lee said the company did not have a business model with recurring income. However, he said the company was venturing into business in services area. “It (services) is not a recurring income but it is more stable because it is repetitive,” he explained, adding that there would be a “ramp up” time for its projects to be reflected on its account.

With more than enough backlog order to process, KNM expects its second half of the year to be better. “We will be quite busy for the next one year. Our backlog will stretch until 2014 and the add on of RM3bil from tenderbook will make us busy,” Lee said.

As at Dec 31, 2010, KNM has a cash and cash equivalents of RM286.5mil would “deliberate” a dividend policy, said Lee, adding that there were some requests by its shareholders. He pointed out that the company had been paying dividend consistently.