Business

Tuesday March 17, 2009

Management buyout of KNM hinges on funds

By YEOW POOI LING


MD: Difficult to raise funding in current environment

PETALING JAYA: A management buyout (MBO) will be considered for KNM Group Bhd but funding must be available, said managing director Lee Swee Eng.

“In the current environment, it will be very difficult to raise funds,” Lee told StarBiz in reference to a Bloomberg report on the possible privatisation of the company.

A Bloomberg report yesterday quoted Lee as saying he would consider leading an MBO as long as banks will the funds.

“We are very undervalued. The opportunity for privatisation is a good opportunity but it’s the source of funding. There is no offer on the table,” he was quoted as saying.

Analysts have mixed views on the report that Lee, KNM’s founder, may consider taking it private if the source of funds is available.

TA Securities head of research Kaladher Govindan said the present valuation of KNM shares was “very cheap”.

“Lee already has about 25% stake in the company. If the offer price is about 30% premium, it would cost him about RM1.3bil,” he said.

The process equipment company’s balance sheet is healthy with net gearing of 0.6 time after considering cash balances of some RM500mil.

“The corporate exercise is possible if Lee can secure the finances from banks or support from private investors. When the sentiment improves, the value will increase,” Govindan said.

He also said the company was unlikely to need huge capital expenditure in the near term as it was on consolidation mode.

“Its coffers should be able to support its working capital. It won’t need huge funding elsewhere,” Govindan said.

Another analyst who declined to be named said while the stock was under-priced, valuations of other oil and gas stocks were also depressed.

“Apart from being cheap, there is no other reason for a buyout. Besides, it will be difficult to raise funds in the present environment,” she said, adding that the privatisation was unlikely to materialise.

KNM shares yesterday closed down 0.5 sen to 32.5 sen. Year-to-date, the value has depreciated some 25%.

 
KNM :  [Stock Watch]  [News]


For latest Bursa Malaysia indices, charts and other information click here

  • E-mail this story
  • Print this story