KN's commentary on K-Euro

I found the following research write-up quite strange. (my comments in green italics)

======>>>>>

K&N Kenanga 3Q FY07 Result Update Date: 3 January 2007

Kumpulan Europlus Berhad

Price: RM0.420 Recommendation: HOLD

Analyst: Teoh Cheng Guan

Kumpulan Europlus Berhad ("KEURO") reported an improved set of 3QFY07 operating results. On an annualized basis, 9mFY07 revenue was 66.9% below our FY07 estimate, and 9mFY07 loss before tax and net loss were 207.5% and 263.1% larger than our FY07 estimates, respectively, mainly due to RM115.8m-additional losses at Talam, which was booked in 2QFY07, in respect of the latter’s FY06 audited results.

===>>> Improved results? LOL!!! How could it be improved set of results when the set of results is way below their estimates? 66.9% below their estimate!!! And best of all... we are talking about revenue (sales) estimates here. Wonder what happened to profit estimates? Does earnings not matter?

3QFY07 turnover declined 48.2% y-y to RM10.3m due to winding down of its construction business as a substantial portion of its on-going projects had either been completed or were near completion. 3QFY07 profit before tax and net profit turned around from losses of RM69.9m and RM69.5m in 3QFY06 to slight profit of RM0.5m (+100.7% y-y) and RM0.5m (+100.8% y-y), respectively; due mainly to: (1) a turnaround in its own operating performance; and (2) 88.5% -reduction in losses attributable to Talam.

==>>>> *cough*... losses...

In terms of q-q comparison, 2QFY07 revenue improved 59.1% q-q due to sand mining activities by the construction division. The 2QFY07 loss before tax and net loss of RM115.8m and RM115.3m improved 100.4% and 100.5% q-q to a small PBT and net profit of RM0.5m and RM0.5m, respectively, in 3QFY07 mainly because 2QFY07 results were hit by the earlier mentioned RM115.8m-losses attributable to Talam.

9mFY07 or YTD turnover recorded a 49.5% y-y decline to RM26.7m as a substantial proportion of its on-going construction projects have either been completed or near completion. 9mFY07 loss before tax and net loss decreased by 15.3% y-y and 15.4% y-y to RM113.7m and RM114.1m, respectively, due mainly to a strong turnaround in its own operating performance despite higher losses attributable to Talam.

2. Recommendation

We are cutting our FY07 revenue estimate by 66.3% to RM36.3m to reflect the depletion of the on-going construction projects and non-consolidation of revenue in relation to the Canal City ("CC") projects.

==>>>Cutting the revenue estimates again? LOL!!!

We are also increasing our FY07 loss before tax and net loss estimates by 133.1% and 175.9% to RM114.9m and RM115.67m, respectively, to incorporate the RM115.8m-additional losses at Talam, which was booked in 2QFY07, in respect of the latter’s FY06 audited results.

==>>> Eh? Increasing fy07 losses before taxes and net losses by 133.1% and 175.9%!!!!



Going forward, KEURO’s profitability will be highly dependent on:

(1) The successful execution of the Flood Mitigation ("FM") project, which is part of the RM6.5b -CC projects that involve the construction of an 18-km FM canal, a 42km toll-free road (Shah Alam – Shah Alam 2 Expressway) and a new upmarket mixed development township to be developed over a 7 to 8-year period; and

(2) The successful award and execution of the West Coast Expressway ("WCE") project, which is key to the entry of IJM Corporation ("IJM") as a 30%-strategic shareholder in KEURO.

Our newly introduced FY08 forecasts suggest an earnings turnaround despite exclusion of the potential contribution from the WCE-related construction works.

Excluding the RM115.8m-loss at Talam in respect of its audited FY06 results, KEURO’s 9mFY07 results do not look too bad. The Talam-problem is very much discounted in our judgment. Management is also turning cautiously optimistic on the group’s prospect due to improving construction sector outlook and seems confident that the CC-project will take off in FY08.

Downside risk could be rather limited, as the market seems to believe that the award of the WCE-concession,

==>>> LOL!!! But aren't you all expecting more losses? If so, how could the downside risk be rather limited?????

and therefore the entry of IJM as a strategic shareholder, is a matter of when and not if.

===>>> yeah... everything hinges on IJM to BAILOUT Keuro, isn't it?

We are maintaining our HOLD -rating on KEURO with a revised target price of RM0.35 (+34.6% from RM0.26 previously) based on an increased P/NTA of 1.5x given an expected earnings turnaround in FY08.

===>> Hmmo.. let me get this straight up..

more losses, below estimates = +34.6% in target price???



Oh, silly billy me, IJM wants to buy (bailout) Keuro! LOL!

NTA/share stood at RM0.233 as at 31 October 2006.



Their target price of rm0.35 is more than Keuro NTA woh!!!!!!!

Like this also can???