Kumpulan Perangsang Selangor Bhd (KPS) has been awarded RM162 million contract by Air Selangor for the supply of various treatment chemicals yet valuations are still underwhelming.
Kenanga Research has maintained its earning forecasts as it perceive the contract win as part of normal course of business for KPS, a group involved on manufacturing, trading, licensing and infrastructure sectors.
It also keeps its UNDERPERFORM call and its TP of 51 sen based on 10x FY23F PER, which is in line with the average forward PER of the manufacturing sector, with no adjustment to its TP based on 3-star ESG rating.
In its Company Update note, the research house noted that KPS via a 51%-owned unit Aqua-Flo Sdn Bhd, has been awarded a two-year contract by Air Selangor for the supply of various water treatment chemicals from January 2024 to December 2025.
“Based on our estimates, the contract will contribute 7% to both KPS’s top line and net profit in FY24 (assuming a NP margin of 4% to 5%).
“We are maintaining our numbers as we perceive this contract win as part of the normal course of business of KPS (which has been implicitly assumed in our forecasts,” said Kenanga today (Nov 22).
“We like KPS for the strong growth prospects of the consumer electronics industry, its long-term growth, the greater role it is playing in the supply chain of a renowned privately-owned innovator of high-tech consumer electronic appliances,” it added.
The risks to Kenanga’s call include a stronger-than-expected recovery in the consumer electronics sector, easing of input costs, and consistent renewal of contracts by key clients
