Anchored by a huge RM1.23bn orderbook to sustain growth for the next 2-3 years. After surging 76% in FY21 net profit (from a low base in FY20), KGB is expected to chalk up another meaningful growth of 48% in FY22, driven by a robust ~RM1.23bn orderbook YTD. At present, the large chunk of the outstanding orderbook is linked to WD (~36% for the general contracting works) vs 64% for higher margin Ultra High Purity (UHP) gas and process engineering.

Riding on the buoyant global fab capacity expansion. To recap, KGB ended 2021 with a bang after securing RM195m (RM85m was from a global reputable solid state memory player while another RM110m was from a silicon wafer manufacturer) worth of UHP jobs in Dec 2021, propelling the value of job wins to RM1.18bn in 2021. In the wake of its impeccable track record, management is hopeful to bag more packages in the pipeline from the reputable solid state memory player given its commitment to invest more than USD150b globally over the next decade to accelerate the manufacturing of memory chips used in mobile phones and personal computers, as well as riding on other regional major wafer manufacturers across Asia (Malaysia, Singapore, Taiwan, China, etc) and prominent HDD players. In summary, KGB’s outlook remains well supported by the tenderbook of more than RM1bn worth of contracts as the group continues to leverage on the semiconductor players expansion plans amid the global chips’ crunch.

Bullish bias following the Tweezer bottom formation. Following a 18.9% slide from 52-week high RM1.85 to RM1.50 yesterday, current knee-jerk sell down provides a good opportunity for investors to accumulate KGB amid undemanding 21x FY22E P/E or 0.43x PEG, riding on its healthy job pipeline and secular growth story.

The stock may have formed a Tweezer bottom after establishing a low of RM1.36 on 25 Jan before recovering to RM1.50 yesterday. The pattern indicates that the pullback is likely over, and a decisive breakout above RM1.52 may spur further upside towards RM1.60-1.70-1.74 zones. Cut lost at RM1.35.

Source: Hong Leong Investment Bank Research - 9 Feb 2022