Malacca Securities Sdn Bhd has made a “Buy” recommendation for Kelington Group Bhd with a target price of RM2.01.
The stockbroking firm said that its fair value is derived by assigning a targeted P/E multiple of 30.0x to its revised FY22f EPS of 6.7 sen. The assigned P/E multiple is in line with valuations of the technology sector that is trading at forward valuations of 31.3x in 2022.
It said that given the order book replenishment exceeds expectations, analysts revised the earnings forecast higher by 1.4% and 5.9% to RM29.6 million and RM43.2 million for FY21f and FY22f respectively after taking into account the aforementioned win.
“Consequently, we maintained our BUY recommendation on KGB, with a higher target price of RM2.01 (from RM1.90)”
Kelington Group Bhd (KGB) via its indirectly wholly-owned subsidiary, Puritec Technologies (S) Pte Ltd has clinched an Ultra High Purity (UHP) contract worth approximately RM40 million. The contract win is the third UHP contract secured from an undisclosed global leader in engineering and project management of high-technology facilities, which is engaged by a global leading semiconductor manufacturer.
KGB will be undertaking supply and installation of process exhaust distribution ductwork under the contract. The new fabrication plant is touted to be the most advanced semiconductor manufacturing facility in Singapore, and its integrated solutions will be catered for fast-growing end markets in the automotive, 5G mobility and secure device segments. The project will commence in mid-October 2021 and is slated to be completed by December 2022.
Following the new win, KGB’s year-to-date order book replenishment stood at approximately RM841 million. This bumps KGB’s outstanding order book to approximately RM979.0m, which represents an order book-to-cover ratio of 2.5x against FY20 revenue of RM394.6m that will provide strong earnings visibility over the next 2 years.
