RHB Research has maintained its BUY call on Kelington Group Bhd with an unchanged target price of RM10.50, seeing further upside from strong earnings execution and its strategic exposure to the front-end semiconductor value chain.
The research house said 1H26 core earnings of RM70.8 million were in line with expectations and expects stronger growth in the second half.
The engineering group’s advanced engineering segment, which accounted for 65% of revenue, grew 19% year-on-year in 1H26, driven by projects in Singapore and Taiwan. RHB also noted that industrial gas revenue returned to growth, rising 10.4% year-on-year in 2Q26 as higher liquid carbon dioxide sales offset weaker trading revenue.
Kelington’s order pipeline has also strengthened significantly. YTD contract wins had reached RM1.76 billion by August, already close to its previous annual record of RM1.8 billion in FY22. Its outstanding orderbook stood at RM2.02 billion while its tenderbook surged 42% quarter-on-quarter to RM7.5 billion, with several major tenders in Singapore, India and Malaysia expected to be decided by 4Q26.
RHB said the tenderbook does not yet include another RM1 billion to RM1.5 billion of tenders submitted in July and August, highlighting further potential for order wins.
Japan could become the next growth market, with more than US$60 billion of investments announced for major semiconductor fabrication projects. RHB believes Kelington could secure hook-up work for Rapidus, Japan’s government-backed foundry.
The research house retained its forecasts and expects core earnings to grow at a 20% CAGR from FY25 to FY28, supported by its robust pipeline and improving margins.
As of 11.08 am, the stock price dropped 3% to RM8.73.
