OSK Research is maintaining its Neutral stance on KNM GROUP BHD [] and technically, its fair value for the share is 59 sen based on its existing PER of 12 times FY10 EPS.

It said on Thursday, April 8 that since BlueFire Capital Group Ltd (Bidco), an entity controlled by Lee Swee Eng, the Group MD, offered to acquire the company?s entire business and undertakings at 90, it used this as its target price, unless Bidco decides to pull out of the acquisition.

On Wednesday, KNM announced that it has received a total tax incentive of RM1.4 billion from the Ministry of Finance in respect of acquisition cost and other approved incidental costs incurred by KNM Process Systems SB (KNMPS) in relation to Borsig?s acquisition. This incentive will be applied over four years, with effect from the year of assessment 2009.

?However, we also understand that the proportion of Borsig?s process equipment being manufactured in Malaysia to date is still minimal at probably less than 10% of that being manufactured in Germany.

?Hence, we do not expect this incentive to have material impact on KNM?s profit and loss account in the near term (probably about 5%-10% only) until we see more of Borsig?s products being fabricated in Malaysia,? it said.