Saturday, May 25, 2013


KNM’s prospects hinge on the Peterborough project as well as Borsig. Only after the group has got the project started off the ground and successfullylisted Borsig will investors regain confidence in its stock.

Winding Up Petition On KNM’s unit …

In April 2013, Australia-listed Mission New Eenrgy Ltd's subsidiary has served a winding-up petition on KNM Group Bhd’s unit, claiming the latter failed to pay A$3.80mil (RM12.2mil).

Its Renewable Energy Plant Project …

It continued to face a delay in securing a financial close for its rm2.3 billion renewable energy plant project in Peterborough, the UK.

The delay and a deviation in the group’s earnings – its audited results for the year ended Dec 31 2012 showed profit standing 37% below what was released in its unaudited results in Feb 2013 0 have sparked investor concerns.

A source says Exim Bank of Malaysia which is the lead arranger for a syndicated loan to fund 80% of the Peterborough project, is still looking for another partner bank to provide KNM with the funding requirement. It is learnt that KNM’s management had hoped to secure the financial close by end of 2012.

Initially, Deutsche Bank Bhd was supposed to be the partner bank but it is no longer in the picture. Exim Bank is now (May 2013) trying to rope in another bank to provide the syndicated loans.

The Peterborough plant is touted as an anchor project for KNM as it represents 47% of the group’s outstanding order book of rm4.9 billion. However it was reported in Feb 2013 that the Peterborough project has been delayed.

Excluding the UK project, KNM’s order book stands at rm2.1 billion including the rm308 million TAIK-NK sulphur recovery unit project in Russia.

Listing Of Its German Subsidiary Borsig GmbH On The SGX …

In early May 2013 KNM Group CEO said it is also finalizing the listing of its German subsidiary Borsig GmbH on the SGX. It aims to complete the listing by the third quarter 2013. However doubts about the deadline as there has been little news on the progress of the exercise … High valuations and unacceptable accounting practices are the main issues.

As at Dec 31 2012, its total loans and borrowings stood at rm937 million. Its cash and cash equivalent have came down to rm189 million which could be due for repayment.

However later reported it has not submitted any proposal to list Borsig GmbH on the Singapore Stock Exchange. This may dampen investor appetite for KNM shares, which were boosted by reports that the company would be listing its German unit in Singapore.

But KNM’s investor relations officier Stanley Khoo said KNM’s plans to list its German based subsidiary Borsig GmbH on the SGX is still intact. This is despite news report that KNM MD Lee as saying that the company has yet to submit any proposal to do so. Stanley Khoo said the company has plans to get Borsig listed in SGX by end 2013.

According to news report, UOB Bank Ltd has valued Borsig at between rm1.8 billion after taking into account the rm500 million loan repayment made to date (May 2013) to Maybank.

KNM could also raise up to rm475 million by taking Borsig public, assuming it divests 25% in the company.

Such a listing may potentially lower KNM’s current (May 2013) debt levels of about RM1 billion and trigger a re-rating on the stock.

KNM, which is involved in the oil and gas fabrication business, bought Borsig in 2008 for RM1.67 billion. Borsig is a market leader in the fields of waste heat recovery systems, quenched coolers and membrane technology.

KNM’s Borsig plan was to unlock its value. UOB Bank Ltd currently (May 2013) values Borsig at between RM1.8 billion and RM1.9 billion after taking into account the RM500 million loan repayment made to date to Malayan Banking Bhd (Maybank).

The listing of Borsig could raise up to RM475 million for KNM, assuming it divests a 25 per cent stake in the Berlin-based process equipment maker. The proceeds from the listing would help KNM to partly fund its renewable energy venture in Peterborough , United Kingdom. The RM2.1 billion build-own-operate project is expected to start in 2013 with KNM spearheading the job with an 80 per cent stake.

The KNM management is waiting for the outcome from the auditor in Singapore to revert on the German-based accounting policies so that it can proceed with the listing plan.

The listing will create a RM2 billion company, a slight premium to KNM's purchase price of RM1.67 billion.

Borsig is a cash cow for KNM, where it has contributed estimated net profits of RM112 million to RM141 million per year over three years.

On Borsig's order backlog of RM843 million as at December 2012, the group is planning to speed up work.

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