Kelington Group Bhd

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• Established presence across regional markets; backed by notable clients include Infineon, Panasonic, Taiwan Semiconductor Manufacturing Company (TMSC), Seagate, Western Digital and Biocon.

• Supported by outstanding orderbook of RM321.0m to provide earnings visibility over the next 12-18 months.

• At RM1.03, price is trading at FY21f PE of 14.1x, which is below the 2Y historical average at 15.5x, suggesting some upsides in our view. Technically, price has experienced a trendline breakout above RM1.00, signaling for further recovery towards RM1.12-RM1.17 with long term target at RM1.33.

Trading Catalyst

• Kelington Group Bhd (KGB) is involved in four major businesses, namely; ultra-high purity (UHP) delivery systems, process engineering, general contracting and industrial gasses for various industries such as photovoltaics & solar, pharmaceuticals & biotechnology, industrial gasses and oleochemicals. The group has established presence across regional markets including Malaysia, China, Taiwan, Singapore, Indonesia and Vietnam. Some notable clients include Infineon, Panasonic, Taiwan Semiconductor Manufacturing Company (TMSC), Seagate, Western Digital and Biocon.

• The recent quarterly result (1QFY20) was mainly impacted by disruption of work site progress in China due to the lockdown since January 2020 and Movement Control Order (MCO) in Malaysia since March 2020. Although we expect further weakness in next quarter bottom line, we are sanguine on the recovery in 2HFY20, supported by outstanding orderbook of RM321.0m, of which RM149.0m was secured in the first four months in FY20 to provide earnings visibility over the next 12-18 months.

• At RM1.03, price is trading at prospective PE of 14.1x for FY21f is below the 2Y historical average at 15.5x, suggesting some upsides in our view. We also note that KGB is standing in a net cash position of RM50.1m, translating to net cash per share of RM0.16 in 1QFY20.

Technical Outlook

• Technically, price has found some stability after the recent pullback towards RM0.95. Price subsequently formed a trendline breakout above RM1.00 as price close above the daily EMA60 level accompanied by higher-than-average volumes. The trendline breakout may signal for further recovery as price may re-test RM1.12- RM1.17 with long term target at RM1.33. Support is pegged at RM0.95 and cut loss is located at RM0.94.

Source: Mplus Research - 20 Jul 2020