KUALA LUMPUR: ECM Libra Investment Research is maintaining its target price of 74 sen and Hold call on KNM Group after the company secured RM143 million in contracts from  from Impress Ethanol Co. Ltd for its bio ethanol project in Thailand.

The project involves building and running a 200,000 litres per day cassava based bio ethanol plant in Chachaengsao, Thailand and is expected to be completed within 18 months. Besides this, KNM also proposed an internal restructuring exercise to streamline their businesses in the Caspian region.

ECM Libra said on Friday, Jan 8 that its target price was based on a 12 times historical average price-to-earnings (PE) pegging FY10 prospective earnings per share.

"Our hesitance at this point of pushing the stock to a Buy is due to the margin erosion seen in 3QFY09. We are concern that this will continue into 2010 as the group grapples to be more competitive than other process equipment players and may compete for lower end jobs that generally yield lower margins in order to beef up plant utilisation.

"Group utilisation is still low for now at less than 70% compared to hitting past 80% to 85% pre-crisis," it said.