KNM's phase 2 of bio ethanol project to provide long term recurring income

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).

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 48
Cxense type: NA
User access status: 0
Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!

Next In Business News

CPO futures likely to trade with downward bias next week
Rupee erases gains on banking worries
MSMEs still at early stage of digitalisation
The global game of ChessGo
Banks remain on the radar
KAB looking to boost earnings via PetGas sustainable energy JV
Are our banks safe?
Vivek Sood appointed as Axiata CEO, MD
Fed’s dovish slant forecast to buoy the ringgit
Short Position: Break-up pays, Hap Seng's RPT

Others Also Read