Belgian contract win gives Kelington a lift

PETALING JAYA: Kelington Group Bhd’s recent contract win is its first for the year with expectations of about RM1bil replenishment to its order book this year.

Kenanga Research, in a report, noted Kelington won the RM170mil contract from a Belgium-based client which supplies microelectronic semiconductor solutions that are used in a wide range of applications in the automotive industry.

The job entails a wide range of responsibilities, including architectural and structural design, civil engineering, mechanical and electrical systems, and various process utilities work.

These are all in support of the construction of an integrated chip manufacturing facility located at the Sama Jaya Free Industrial Zone in Kuching, Sarawak.

The scope of this job which falls under the general contract businesses segment will commence immediately with an expected completion date of March 2024.

Kenanga Research gathers the customer’s expansion is in collaboration with the Sarawak Education, Innovation and Talent Development Ministry to create high-skilled jobs and enhance Sarawak industrial ecosystem.

The Sarawak government also hopes for this partnership to extend into the technical institutions and universities in Sarawak to establish a new curriculum focused on the field of semiconductor technology for both undergraduate and graduate students.

The contract win takes the tech related company’s current outstanding order book stands at about RM2.27bil which provides strong earnings visibility.

Kenanga Research continues to like Kelington for its unique proxy position in the front-end semiconductor space and strong track record that continues to attract large multinational customers.

It is positive on the company’s venture into the industrial gas segment which has high entry barriers but yields very lucrative margins.

The research house maintained its “outperform’’ call on the stock with an unchanged target price of RM1.80 a share, with the valuation based on the financial year 2023 price earnings ratio of 22 times which is in line with its peers’ forward average.

The risks cited for its call include slower revenue recognition due to on-going Covid-19 lockdowns in China, further cut in semiconductor capital expenditure, and delays in liquid CO2 ramp up.

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