Stock Name: KNM
Company Name: KNM GROUP BHD
Research House: OSK

KUALA LUMPUR: OSK Research has upgraded KNM GROUP BHD [] to a Trading Buy with a Target Price of 56 sen after securing a US$216 million (RM680 million) bid to develop gas condensate fields in Uzbekistan from Lukoil Uzbekistan Operating Company.

The research house said on Friday, Nov 19 KNM's current share price has an upside of about 29% to its target price of 56 sen which it derived based on a PER of 9x FY11 earnings.

'We are upgrading our call to Trading Buy from Neutral previously,' it said. 'We believe its share price would react positively to this big one-off contract in the short term.'

OSK Research said for KNM's share price sustainability in the longer term, investors would need assurance on the

continuous contract flows which it still doubted as the global O&G industry had not fully reached its recovery stage in the past 12 months although crude oil price had stabilised between US$70 to US$80 a barrel over the period.

It said as more countries raise interest rates, this may suppress the global economic growth, which then result in lower demand for energy (O&G) and this again may delay the oil majors and national oil companies from spending further capex.

'Do note that KNM is a global O&G process equipment company and hence its business is dependent on the health of the global economy rather than Malaysia alone. Therefore, we have a Trading Buy call on the stock rather than a Buy,' it said.