Affin Hwang Capital Research Highlights

Author: kltrader   |   Latest post: Thu, 17 Sep 2020, 2:51 PM


Kelington - Earnings Hit by Admin Costs and Tax

Author:   |    Publish date:

Kelington’s (KGB) 2Q19 earnings missed estimates as a result of higher-than-expected effective tax rate and admin expenses. We cut our FY19 earnings by RM2m in light of these, also factoring in our new FY20-21 forecasts. Nevertheless, we maintain positive on its long-term business outlook; the commencement of LCO2 plant by end-2019 will be an earnings growth driver in FY20-21. Maintain our BUY rating with a lower TP at RM1.68 (from RM1.72).

2Q19 Results Was Below Our Expectations

2Q19 net profit came in at RM5.1m (+5% qoq, +16% yoy), below ours and consensus’ expectations. The miss was mainly due to a higher-thanexpected tax rate and bonus provisions made in 2Q19. Excluding a RM0.7m write back of trade receivable, 2Q19 core net profit was lower yoy at RM4.3m (-23% qoq, -19% yoy). The Ultra-High Purity (UHP) segment saw lower revenue at RM55.6m (-26% yoy) as KGB has yet to recognize most of their major contracts, including their recent secured RM96m contract from Singapore. Process Engineering (PE) saw higher revenue of RM33.3m (>100% yoy) as the group wraps up several works in both Malaysia and Singapore. These two segments contributed to 93% of KGB’s 2Q19 revenue (Fig 2).

Singapore Remains the Key Market

2Q19 revenue was higher by 7% yoy at RM95m as KGB completed more jobs in their 3 main operating regions. Singapore continues to contribute the bulk of the revenue at RM38m (+45% yoy), followed by China at RM29m (- 26% yoy) and Malaysia RM24m (+22% yoy).

Order Book Update

The total outstanding order book stood at RM312m (ytd new wins amounted to ~RM220m), compared to RM330m in end 1Q19. UHP segment made up the bulk of the order book at 76%, followed by PE and GC at 19% and 4% respectively. Singapore, Malaysia and China remains the 3 biggest contributors to the group’s order book at 59%, 18% and 18% respectively.

Maintain BUY With a Lower TP of RM1.68

We maintain our BUY call but lower our target price to RM1.68 (from RM1.72), based on unchanged 16x FY20 EPS. We cut our 2019-21E EPS by 3-9% after incorporating higher admin costs and effective tax rate. Notwithstanding our earnings cut, we remain optimistic on KGB’s long-term growth premised on its industrial gas business expansion plan and the commission of the LCO2 plant by end-2019.

Source: Affin Hwang Research - 23 Aug 2019

Share this
Labels: KGB

Related Stocks

Chart Stock Name Last Change Volume 
KGB 1.18 0.00 (0.00%)

  Be the first to like this.

I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
View Trading Signals and run Live Backtest
MQ Affiliate
Earn rewards with MQ Affiliate Program


Top 10 Active Counters
 SCOMNET 1.950.00 
 KOTRA 3.050.00 
 UCREST 0.130.00 
 GENM-C73 0.010.00 
 PUC 0.2150.00 
 WILLOW 0.4250.00 
 EAH-WE 0.010.00 
 IRIS 0.280.00 
 TOPGLOV-C79 0.400.00 
 BTECH 0.430.00 


1. The Equity Market Index Benchmark in Malaysia CMS
2. Trading Scenarios of Derivatives Bursa Derivatives Education Series
3. Derivatives 101 Bursa Derivatives Education Series
4. Why Trade FKLI? Bursa Derivatives Education Series
5. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!