Rakuten upbeat about KGB’s RM65mil job win

PETALING JAYA: Rakuten Trade Sdn Bhd remains positive on Kelington Group Bhd’s (KGB) recent major contract win, which could boost its earnings over the next two years.

The research house kept a “buy” call on the engineering service group with a higher target price of 91 sen based on average 13 times price-to-earnings ratio (PER) for financial year 2018 (FY18).

Rakuten Trade in its report said since its initial coverage report on Oct 2, 2017, KGB’s share price has risen to 66 sen from 60.5 sen. The company’s recent 102.62 million yuan (RM65.4mil) contract from China’s Chengdu Construction Engineering Corp, is the single largest contract this year. Under the contract, KGB will supply and install bulk gas system and distribution piping for Gexin (Chengdu) Integrated Circuit Manufacturing.

According to Rakuten, KGB has year-to-date secured up to RM246mil worth of contracts, resulting its order book to balloon to RM271mil.

“KGB is set to benefit from China’s chip expansion to increase manufacturing capacity of memory chips and integrated circuits under the ‘made in China 2025’ government initiative,” Rakuten Trade said.

According to SEMI’s China IC Industry Outlook 2017, spending on semiconductor fab equipment is forecast to surge to US$12bil with 15 new fab projects announced this year.