KNM plans to have recurring income stream

KUALA LUMPUR: Process equipment manufacturing, engineering and construction group KNM Group Bhd aims to derive at least 30% of its income from recurring jobs by 2019.
The target is part of a five-year plan, which starts in 2017, to increase its recurring income stream to 70% of total income.
KNM group finance director Terence Tan said currently all its income are from one-off contracts.
“Our long-term strategy for KNM is to develop a sustainable recurring income stream in the future. In five years, we want 70% of our income derived from a recurring income stream,” he told a press conference after KNM’s signing ceremony for financing facilities of up to RM689.9 million yesterday.
Tan said next year will be the first year the group sees a recurring income stream from its bioethanol project in Thailand.
The first phase of 72%-owned subsidiary Impress Ethanol Co Ltd’s (IEL) bioethanol plant has a production capacity of 200,000 litres ethanol a day.
Tan said after the issuance of its Thai bonds by year-end, it is going to kickstart the second phase of the bioethanol plant, which will boost its production capacity by another 200,000 litres ethanol a day.
“We’re not looking at just the recurring income in Thailand, we also have the Peterborough project in London, which is another recurring income stream but it will only come onstream after 2018,” said Tan.
KNM group CEO Lee Swee Eng said it is targeting for transformation into having more recurring income instead of being a purely contracts player, which is subject to contracting cycles depending on the economic situation.
“We’re there to stay in Thailand. We’re also looking at other opportunities on renewable energy in Thailand and waste-to-energy projects within the next five years,” added Lee.
Earlier at the signing ceremony, KNM sealed deals for bonds of up to THB2.78 billion (RM329.9 million) guaranteed and issued by Credit Guarantee and Investment Facility (CGIF) (Thai bonds) and another RM360 million financing facilities from Danajamin Nasional Bhd and Affin Islamic Bank Bhd.
Proceeds from the Thai bonds will be utilised by KNM to support IEL for its bioethanol plant in Thailand. KNM is the first Malaysian company to obtain a credit guarantee from CGIF for its bond to be launched in Thailand, and the first Malaysian-listed company to issue Thai currency denominated bond in the Thailand capital market.
CGIF was established by the ten members of the Association of Southeast Asian Nations (Asean) together with the People’s Republic of China, Japan, Republic of Korea (ASEAN+3) and Asian Development Bank (ADB) to help companies that otherwise would have difficulty tapping local bond markets to secure longer-term financing, reduce their dependency on short-term foreign currency borrowing to mitigate currency and maturity mismatches.
Meanwhile, the Islamic guarantee facility of up to RM200 million from Danajamin for a proposed capital market instrument, as well as blanket working capital facilities of up to RM160 million from Affin Islamic are for contracts relating to the Refinery and Petrochemical Integrated Development (Rapid) project in Pengerang, Johor.