RHB Research has maintained a “Buy” recommendation for Kelington Group Bhd with a trading price of RM1.70, 50% upside. Its TP is premised on 32x FY22 FD EPS with parity ESG adjustment based on its latest review.
The stockbroking firm said that the sharp sell down due to the prevailing risk-off sentiment is a good buying opportunity
The research house said that the management reaffirmed its strong earnings narrative at the post 4Q21 results briefing with key takeaways/observations: The uptrend in wafer foundry (fab) equipment spending from secular demand and ongoing capacity expansion is set to continue into 2024 based on SEMI’s projection, manageable impact from higher input cost (built into project tenders at the outset), and robust growth of the industrial gas segment.
Despite resources being stretched thin from record orders, RHB said that the management sees a decent runway still for new projects, with better lead times from existing jobs.
On its order book of RM1.3 billion, RHB said that it includes hook-up jobs from China’s largest wafer fab for five sites, where a formal award is pending.
Excluding this, the c.MYR1.3bn tender book comprised of new hook-up jobs from Micron, Global Foundries (GF), and Siltronics, for which base-build projects were secured in FY21.
The stockbroking firm said that the incumbent in Singapore, KGB is also well placed to secure base build contracts for United Microelectronics Corporation’s (UMC) new USD5bn 22/28 nanometre (nm) fab when the tender opens. In Malaysia, key tenders include Intel’s new fab in Bayan Lepas, Penang (Intel–Pelican project), which forms part of the chip maker’s USD7bn investment over 10 years; Infineon’s expansion (Melaka/Kulim); Austrian-based Austria Technologie & Systemtechnik AG (AT&S) plant, and Silterra (Kulim)
