KNM: disappointing

KNM in the lime light again. This is another stock that I'm still holding and losing.. Bought it back in 2009 when I use only fundamental analysis to select stocks. Apparently my fundamental analysis skill is way out.

In 2009, this is the info I get:

 

Year	Revenue (mil)	Net Profit (mil)
2005	343	41
2006	917	133
2007	1230	188
2008	2528	336

Revenue and net profit grow almost 100% almost every year. It expands so fast mainly thru merger & acquisition. That time before 4:1 consolidation my average is at RM0.77, then came the news of  take over at RM0.90! Very happy. Then the deal collapse, coincide with the economy recession & drop in oil price. So KNM share price dive to a low of RM0.40!

Subsequent financial result:

 

Year	Revenue (mil)	Net Profit (mil)
2005	343	41
2006	917	133
2007	1230	188
2008	2528	336
2009	1821	170
2010	1559	131

The CEO (how to describe him? cunning? manipulator?) review earlier that FY2011 can achieve profit of RM363mil (which is suppose to be a record!). Yesterday 2011Q1 result out: profit only RM19mil, which is only 5% of full year target, and almost a record-low for quarters profit since 2006!

However, I think it's better to look at the revenue and operating profit, as I notice KNM's net profit is largely influenced by taxation. Operating profit also show more clearly how the core business is doing.

 

Revenue (mil)	Q1	Q2	Q3	Q4
2009	525	439	458	398
2010	373	383	418	384
2011	413

 

Operation Profit (mil)	Q1	Q2	Q3	Q4
2009	151	78	42	-68
2010	11	21	54	20
2011	17

If compare QoQ, both revenue and operating profit increase. If compare to last quarter (2010Q4), the revenue rise but the operating profit drop slightly. Seems not too bad, still got some business to do but how soon it will really bottom out is a concern.

This morning alone the share price already drop >10%. Are the investors too panic? Or there's other bad insider news which I'm not aware of? Even though the company came out with a good news immediately (get contract in UZB), it couldn't stop the share to plunge. Chance to speculate??

My view is, to invest long term in this company seems a bit risky, as the cash flow also not good and no strong sign of bottoming out just yet. Safe to accumulate at low? But there are lots of other better stock to put money in. If KNM is going to bottom out soon, then at this moment we can buy at its low. But if not, our money will go to Holland for many years and don't want to come back. Who knows? Only Mr Lee knows.