Malacca Securities has maintained a “BUY” recommendation on Kelington Group Bhd (KGB) with an unchanged target price of RM2.10.
It said that it has derived its target price by assigning a targeted P/E multiple of 28.0x to FY22f EPS of 7.5 sen. The assigned targeted P/E multiple is slightly above the valuations of the technology sector that is trading at 25.3x for 2022f. The slight premium is justifiable due to KGB’s niche business model.
Moving forward, the stockbroking firm said that KGB’s outstanding order book of approximately RM1.30billion, which represents an order book-to-cover ratio of 2.9x against FY21 revenue of RM517.7million will provide strong earnings visibility over the next 2 years.
Malacca Securities said that it remains sanguine on KGB’s outlook as it continues to leverage on the semiconductor players’ expansion plans with tenders skewing towards larger-scale wafer fabrication projects.
Meanwhile, it expects the relatively large-scale turnkey contract valued at RM420 million secured in mid-September 2021, to generate a substantial contribution from FY22f.
“With the LCO2 plant is operating only at around 60.0% in FY21, there is ample of room for expansion as KGB looks to tap onto the food & beverage segment after obtaining the Halal certification. For FY22f, we have imputed a utilisation rate assumption of 75.0%,” the stockbroking firm said
