Kelington Group Bhd’s recent acquisitions have made it a favourite among analysts with Malacca Securities Sdn Bhd reiterating a “buy” recommendation for the stock.
Kelington Group Bhd (KGB) via its wholly-owned subsidiary, Kelington Engineering (S) Pte Ltd (KES) has received an award of a contract from an undisclosed global leader in engineering and project management of high-technology facilities to undertake the gas system distribution works for the silicon wafer manufacturer’s new manufacturing facility in Singapore.
The contract value is worth approximately RM110.0million commencing immediately from December 2021 and expected to be completed by May 2023. Malacca Securities said that KGB has also secured several smaller sized UHP contracts in Singapore with a combined value of RM66.3m in recent weeks.
The research house said that given that the order book replenishment has exceeded our expectations, raised the earnings forecast for FY22f by 2.8% to RM44.4million. It said that has re-iterated its “BUY” recommendation on KGB with a higher target price of RM2.07 (from RM2.01).
“Our fair value is derived by assigning targeted P/E multiple of 30.0x to its FY22f EPS of 6.9 sen. The assigned P/E multiple is in line with valuations of the technology sector that is trading at forwarding valuations of 32.0x in 2022,” it said.
The research house said that moving forward, KGB’s outstanding order book of approximately RM1.23billion n (56.8% or RM696.0m from UHP segment), which represents an order book-to-cover ratio of 3.1x against FY20 revenue of RM394.6million will provide strong earnings visibility over the next 2 years.
Given the persistent semiconductor chip crunch, KGB’s outlook remains well supported by the tender book of more than RM1.00bn worth of contracts as the group continues to leverage on the semiconductor players expansion plans.
