Friday, May 27, 2011

History Repeats As KNM Tanks On Extremely Weak Earnings

From the posting How Is KNM's Earnings Guidance Faring?

  • Mun Wai said...
    Moo,Quoted from your posting on 9 Mar : "Now because KNM's is telling all the research houses that it will earn so much, naturally the research houses have to base their fair value target projection for KNM based on these high numbers."

    By sticking tothis unrealistic earnings guidance and consequently arrive at their earnings estimates (AmResearch even says 383m), won't the research houses are confusing many naive minds?

Good point.

Well, in my usually flawed and wrong opinion, if a CEO or management opens its mouth and guides its earnings, I believe that the analyst/research reports have no choice and they have use that GUIDANCE number!

This is what the INSIDER, the CEO, the TAIKOR is telling them. The analyst cannot simply say, 'Oh no, dear Bossie, your GUIDANCE numbers are very rocket. There's no way your company can achieve those numbers!!!!'.

It's like telling the CEOs they are BS-ing! They simply cannot do that, can they?

And now that they do follow the guided numbers and when the actual earnings are way below estimates, the analysts would probbly feel silly.

Anyway as per the March posting: What I Think Of KNM's Earnings Guidance

Let's compare KNM's guidance previously and compare to what KNM actually earned.

Such comparison should be useful, yes? At least we get to know the quality of KNM's earnings guidance.

So how did KNM do?

fy 2008, KNM made 336.175 million. (KNM guided 450 million)

fy 2009, KNM made 257.847 million. (KMM guided 700 million

Yeah... naturally KNM tanked big time back then!!!

But the point is KNM's guidance back then was horrendous and way off target!


Moolah said...

Mun Wai: You might 'like' this posting - check out the links included inside.

K C said...

Ooo Moolah,
Another two recommendations to buy KNM at a target price of RM3.00 as extracted from a website:

"MIDF Research maintained a Buy on KNM with a target price of RM3.20 while Maybank Investment Bank Research was more optimistic, keeping KNM as Buy with an unchanged target price of RM3.20."

Funnily I have not seen one recommending a sell on KNM yet! Very much like what I have read in two books about Enron. The title of the books are "The smartest guy in the room" and "Conspiracy Theory: The true Enron story"

In them, every analyst was still recommending "buy" for Enron when it was falling like a knife from more than $90 to pennies.

Moolah said...

Funnily I have not seen one recommending a sell on KNM yet!

==> Err... RHB actually downgraded KNM.

I think they were listening to some Hainanese music.

Significantly below expectations. 1QFY11 PBT of RM6.3m was significantly below expectations, accounting for only 2.3% and 3% of both our (RM277.5m) and consensus (RM208.9m) estimates respectively. We have opted to look at PBT of the company as it is a better measure of KNM’s operational earnings and excludes the effect of the tax incentive.

Cut to Underperform. We are rolling forward our valuations to FY12. While the stock appears inexpensive (11x FY12 EPS) we believe that the stock will see minimal share price movement moving forward, given that it has negatively surprised the market in the past two quarters. As such we reduce our target PER to 12x (from 15x previously). Our new fair value is RM2.28/share. Whilst we are positive on the sector’s prospects and believe the company should post better earnings moving forward, we will only revise our outlook when we see more sustainable earnings growth. We thus downgrade our call on the stock to an Underperform.

Hainanese music is surely geng! :P

solomon said...

Care to write on Sime and the fabrication yards??

K C said...

I hope the boss of this RHB Investment Bank do not receive a call from KNM telling him to revise his report and upgrade the earnings and target price. You know they just got 200+m new job and the potential of a few more billion worth of contracts. If RHB Investment has any dealing with KNM, I am sure this will happen and RHB's KNM target price may be revised to say 5.00!

Mun Wai said...

Moo : Thank you very much ! :)

p/s : I DO NOT have prejudice/hatred against analysts. So, please don't attempt to spam Moolah's blog. Tq