PETALING JAYA: KNM Group Bhd
’s investment in the second phase of its bio ethanol plant project in Thailand is expected to provide long term recurring income for the group, according to Hong Leong Investment Bank (HLIB) Research.
The research house on Monday said on the whole it was positive of the group’s project for the second phase as it signifies the successful implementation of the phase one project, which has been recently completed in early May 2017.
It added that the project was expected to provide long term recurring income to the group and the risk of project cost overrun would be minimal as the engineering, procurement, construction and commissioning (EPCC) work of the plant would be carried out by the group’s internal EPCC arm.
KNM has allocated 1.3 billion baht (about RM159mil ) for the construction of Phase 2 fuel-grade Impress Ethanol Plant in Thailand. The capacity of the original Thai bio ethanol project (Phase 1) is 200,000 litres per day.
Phase 2 (with construction duration of 18 months) would bring the plant’s production capacity to a total of 500,000 litres per day.
Earliest earnings contribution from this project is only expected in 2019. The magnitude of earnings is also dependent on ethanol pricing (selling price) and also cassava pricing (feedstock price), it noted.
Based on assumptions of ethanol selling price of 23 baht per litre and cassava cost of 5,600 baht per tonne, the research house expected profit contribution of the second phase project estimated to be RM15mil, which is in addition to 1st phase expected contribution of RM10mil.
HLIB, which is upgrading the stock to a buy from sell with a target price of RM0.32, said it does not discount the possibility of delay in commencement of phase 2 project, as witnessed in phase 1 (which has been delayed for a year).
Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!
