Kelington Group Bhd

Road to recovery

• 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 RM488.0m to provide earnings visibility over the next 12-18 months.

• KGB has maintained a healthy balance sheet with a relatively low net gearing of 0.1x in 2QFY20. Technically, a breakout above RM1.18 may signal for further upside towards the next resistances at RM1.24-RM1.27 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 results (both 1QFY20 and 2QFY20) were 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. Nevertheless, we are upbeat on the recovery process in 2HFY20, supported by outstanding orderbook of RM488.0m that will provide earnings visibility over the next 12-18 months.

• We note that KGB maintained a healthy balance sheet with a relatively low net gearing of 0.1x in 2QFY20.

Technical Outlook

• Technically, price has found some stability after the recent pullback towards the daily EMA120. Price subsequently rebounded with the uptrend formation being established in early September 2020. A breakout above RM1.18 may signal for further upside towards the next resistances at RM1.24-RM1.27 with long term target at RM1.33. Support is pegged at RM1.11 and cut loss is located at RM1.10.

Source: Mplus Research - 23 Sept 2020