Malacca Securities Sdn Bhd is upgrading Killington Group Bhd (KGB) to a “Buy” recommendation with a higher target price of RM1.90. It said that given the order book replenishment has surpassed its expectations, the research house has raised its earnings forecast by 9.4% and 38.9% to RM29.2million and RM40.8 million for FY21f and FY22f respectively.
It said that its fair value is derived by assigning a targeted P/E multiple of 30.0x to its revised FY22f EPS of 6.3 sen. The assigned P/E multiple is in line with valuations of the technology sector that is trading at 30.7x for 2022, the research house said.
It also said that the risks to its recommendation and target price include weaker-than-expected targeted order book replenishment of RM450.0 million for FY22f. “Any reversal in semiconductor sales may dampen the large scale UHP projects delivery to China and Singapore, given that the UHP segment plays a major part in total revenue contribution and earnings growth,” it said.
Moving forward, Malacca Securities said that it believes that there will be more projects, particularly within the semiconductor space. As it is, KGB’s outstanding order book of approximately RM902 million; representing an order book-to-cover ratio of 2.3x against FY20 revenue of RM 394.6 million will provide strong earnings visibility over the next 2 years.
