RHB Investment Bank Bhd (RHB Research) maintained its BUY call on Kelington Group Bhd and raised its target price to RM10.50 from RM9.10, implying 20% upside, as aggressive semiconductor capital spending is expected to drive double-digit earnings growth through FY2028.
RHB Research expects Kelington’s second-quarter FY2026 profit after tax and minority interest to rise 32% to 48% quarter-on-quarter to RM40 million to RM45 million, with results due on 20 August. The broker said the outlook remains supported by an outstanding orderbook of RM1.92 billion as at 1QFY2026.
The research house said Kelington is benefiting from a multi-year capacity expansion by wafer foundries as chip demand continues to exceed supply. Its channel checks indicate key foundries have pre-sold capacity one to two years ahead of actual construction, reflecting strong artificial intelligence-led demand.
RHB Research expects FY2026 contract wins to surpass the previous high of RM1.8 billion recorded in FY2022, compared with RM1.25 billion in FY2025. Several tenders in Singapore, India and Malaysia are expected to be decided by the fourth quarter.
It also highlighted Kelington’s expansion into India through its first air separation unit investment and sees Japan as another potential growth market as the country attracts major semiconductor investments.
The target price is now based on 35 times FY2027 earnings, up from 30 times previously. RHB Research also expects Kelington’s strong net cash position to support higher dividends, forecasting 16 sen per share for FY2026 compared with 13 sen in FY2025.
As of 10.09 am, the stock price slips 0.69% to RM8.69.
