Affin Hwang maintains ‘buy’ stance on Kelington

KUALA LUMPUR: Affin Hwang Capital has raised Kelington Group Bhd’s financial years 20232024 earnings forecasts by seven to eight per cent after factoring in its higher order book replenishment rate.

“We are optimistic on Kelington’s outlook on expectation of more prospective tenders materialising in China and Singapore as fab owners continue to expand aggressively, such as Taiwan Semiconductor Manufacturing Co’s expansion into Singapore.”

The research firm said Kelington had a strong outstanding order book of RM1.2 billion, which had yet to include the RM80 million gas hook-up contract in Shanghai secured from Semiconductor Manufacturing International Corp on May 12.

The contract represents a seven per cent increase to the existing order book.

“Based on the recent years’ trend where annual hook-up jobs are only awarded to a sole winner, we are expecting more contract news flow pertaining to this client,” it said.

The research firm said about 10 per cent of Kelington’s current order book likely comprised work based in Shanghai and, as such, was a positive development to the group.

“Despite the twomonth Covid-19 lockdown in Shanghai, Kelington was able to operate with minimal disruptions by having sufficient raw materials.”

Meanwhile, Affin Hwang added that the growing liquid carbon dioxide demand had seen plant utilisation rising to 70 per cent.

“This will further strengthen the company’s recurring income stream and industrial gas segment revenue,” it said.

Affin Hwang has reaffirmed its “buy” call on Kelington with a higher target price of RM1.50 from RM1.39 previously.

Despite the two-month lockdown in Shanghai, Kelington was able to operate with minimal disruptions by having sufficient raw materials and inventories. AFFIN HWANG CAPITAL