Blog Research: LONBISC 7126

A home grown Malaysian company, London Biscuits Berhad Group’s main business philosophy hinges on manufacturing and marketing cakes and snack food which score high in terms of product safety and quality. The company strongly believes that this is the only way to ensure the customer satisfaction and loyalty to the product and the brand it embodies.

London Biscuits’ individually packed and ready to eat products can be divided into 2 main categories namely:
Corn based snacks
Cake products such as Swiss Rolls, Pie Cakes and Layer Cakes

In addition, London Biscuits also manufactures range assorted chocolate confectionery including chocolate-coated peanuts and biscuits, pancake cookies, jelly and puddings, wafer sticks, cup sticks and snack noodles.

As a pioneer in the cake products segment locally, London Biscuits has fine-tuned the process of making cakes with long shelf life, of 8-12 months, without refrigeration.London Biscuits products can be found in Malaysia and 65 other markets, worldwide. Its main overseas markets are China, Hong Kong, Macau, Indonesia, Singapore, Taiwan, Thailand, Vietnam and the Middle East.

Financial Performance

TURNOVER('000)
10--152,144 (Q3)
09--184,302
08--138,163
07--117,171
06--107,740
05--81,958

PROFIT/LOSS BEFORE TAX
13,904 (Q3)
17,612
9,257
14,604
18,644
14,539

NET PROFIT/LOSS TO SHAREHOLDERS
11,650 (Q3)
16,027
10,504
11,852
14,201
11,503

GROSS EPS (SEN)
13.79 (Q3)
20.54
13.49
16.48
20.39
16.86

GROSS DIVIDEND (RM)
0.04 (Forecast)

0.04
0
0.05
0.07
0.15

Forecast EPS 2010 = 0.18(with Q4=0.04)

Industry PE = 10

Real Price = 0.18*10 = 1.8
Current Price = 1.25

(31% upside potential !!)

NTA = 2.16 (42% discount from NTA)

Interest in Associated companies

Lay Hong Berhad 24.59 % @ price 1.15 = worth 0.136 per share

Khee San Berhad 32.87% @2008 0.56 =worth 0.115 per share

TPC Plus Berhad 48% @ 2010 0.255 =worth 0.102 per share

Total = 0.35 per share + cash pers share 0.1585

= 0.5 per share

　
Reason to Buy:

1)With the company business model is consumer product which is a defensive sector that recorded a steadily growth rate in the business. Diversified client in almost 65 country.

2)Hari Raya is Coming, the profit will be boost up in the coming quarter which maybe exceed forecasted earning.

3)Strong financial record and growth rate.

4) Strong confident from the management on the coming year,

DATO’ SRI LIEW KUEK HIN, SSAP, DIMP, PJK, JP Chairman of the Board, in his statement in the latest annual report: Outlook and Prospects The smile is slowing returning to the face of many Malaysians Manufacturers and Exporters, which were directly or indirectly affected by the global economic crisis, which led several countries to a worst recession that they had experienced thus far. Fortunately, many feel the worst should be over and recovery is in sight. The Board, is once again optimistic and confident that LONDON would be in a good position to end the financial year 2010 with a “bang”.

Recommendation: Strong Buy (target price 1.8)

OSK upgrade KNM Group TP RM1.060

KNM announced yesterday that it has invested in a JV company, Verwater, which hassecured a EUR220m (RM1.1bn) job to build an oil storage terminal. Also, at ourrecent meeting with KNM’s management, we gathered that the group would besecuring more business, especially after its customers have obtained financing fortheir O&G projects. We believe KNM would soon get some jobs from Technip to buildthe new Jubail refinery. The group is also well positioned to participate in the Gorgonand Papua New Guinea LNG plants, which could each contribute a few hundredmillion US$ in contract value. Maintain Buy with upgraded TP of RM1.06.

A hint of more business. Recently, we met up with KNM’s management and gather that it would be awardedsome new contracts anytime now. We understand that the group is close to getting a few sizeable contractsalthough their actual award would depend on its customers’ success in getting funding for the O&G projects.Once these customers obtain the green light from their banks, KNM’s orderbook replenishment would receive abig boost since the negotiations on some of the contracts are in the final stage of negotiations. Althoughmanagement has not provided guidance on the contracts’ potential value, we believe these could be worthmore than RM2.0bn.

May benefit from Technip’s job award from Saudi Aramco. In July 2009, Technip won the award for 2major turnkey contracts from Saudi Aramco Total Refining and Petrochemical Company (a JV companybetween Saudi Aramco & Total) to build a refinery at the Jubail industrial area in Saudi Arabia. We gather thatthe contract value is US$4bn-US$5bn, which we believe should benefit KNM as it stands to secure a portion ofthe jobs given its more than 18-year business relationship with Technip, which is also one of the group’slongest standing customers. The projects’ work scope encompassing engineering, procurement andconstruction would involve some of KNM’s process equipment.

Gorgon LNG plant could be another boost for KNM. In our Sept 15, ’09 sector news flash, we cited reportsthat Chevron announced that the Gorgon gas project has been approved and will be developed off northwestAustralia. We understand from KNM’s management that it is also bidding for the LNG plant project. The groupis bidding for a few hundred million US$ worth of jobs and expects to know the outcome of its bids byDecember 2009. Apart from Gorgon, KNM is also bidding for a few hundred million US$ worth of jobs for thePapua New Guinea LNG plants, and expects to the results to be announced in 1H10.

An early beneficiary of a revival in oil sands. With the price of crude oil building a new base at US$70/barrellevel, it would be a matter of time before oil sands projects, which were abandoned earlier owing tounfavourable oil price, are revived. We believe KNM would be one of the early beneficiaries given that: 1) it hasthe technology to extract oil from oil sands, and 2) it has the ready infrastructure, having set up a plant inEdmonton, Canada with a capacity of 10k tonnes, which can be increased to 30k tonnes when the need arises.

Upgrading FY10 earnings forecast by 4% to incorporate the oil storage terminal job. Our upgrade isminimal given that we have earlier factored in some job replenishment for the company as we believe 2010would give a better outlook to the company.

Maintain Buy. We have also upgraded our target price to RM1.06 from RM1.01, based on the existing PER of10x FY10 EPS. Going forward, we believe there would be an upward re-rating on the stock because: 1) KNM islikely to get a portion of its tenders once its customers secure the financing for their O&G projects; 2) the globaleconomy is on the recovery track, which will boost demand for O&G and fuel demand for its processequipment when new projects commence; 3) financial institutions would be more willing to lend money to O&Gcompanies once the global economic picture clears; 4) crude oil price is progressively building a new base atUS$70/barrel, which makes O&G projects more commercially viable to carry out, such as oil sands projects,and 5) KNM is a main beneficiary of the global economic recovery, thanks to its global presence and broadcustomer base. Finally, we also expect its orderbook to surge to RM3.2bn (from RM2.7bn) on factoring in thisoil storage terminal job.

KNM 7164

'Buy' ratings for KNM, Kencana, Dialog

OSK Research Sdn Bhd said it has “buy” ratings on KNM Group Bhd, Kencana Petroleum Bhd and Dialog Group Bhd.

The three companies are the “likely beneficiaries” of a planned US$10 billion refinery in Malaysia, OSK said.

“Any additional new capital expenditure spending into the oil and gas industry will create more job opportunities for our local players,” OSK said in a report today.

-- Reuters

科恩马集团 KNM 7164

此股若突破0.855的技术水平将可以入市累计。从技术图表来看，此股正朝向一波又一波的技术阻力前进，预计在油价攀新高时，将可吸引外资进场扯购，进而推高股价，在高成交量的烘托下，股价将节节上升。因此，有信心油价可冲破70美元的股友们可把握机会进场。