Affin Hwang initiates coverage on Kelington with buy call, TP of RM1.60

KUALA LUMPUR: Kelington Group Bhd is lookng at positive prospects as it ventures into the business of supplying industrial gases, which should help to provide a long-term recurring income stream to the group.

"Once the first plant is up and running by September 2019, the group will effectively be the second largest liquid carbon dioxide (LCO2) player in town," said Affin Hwang Capital Research, which initiated coverage on the counter with a buy rating and target price of RM1.60.

The research house expects the progressive ramp-up at its LCO2 plant and future expansion projects to be key earnings re-rating catalysts in the coming years, which would also help to lift the overall group margin.

"Our 2019E and 2020E core net profit are set to post 3-year CAGRs of 13% and 22%, respectively, driven by prospective growth in China and Singapore UHP contract flows," it said.

Affin Hwang added that Kelington stands to benefit as the semicon industry is still poised for further growth, while it has a huge China presence and benefits from the "Made in China" masterplan. 

It added that the group had a compelling growth story as it expands into the industrial gas market supported by a solid balance sheet with net cash along with a mangement network ad strong technical background from its MOX days.