PETALING JAYA: Kelington Group Bhd
is expected to have another year of strong earnings execution, as the semiconductor sector continues its trajectory of structural growth in spite of the Middle East conflict, RHB Research says.
The research house has raised its earnings projections on the integrated engineering solutions provider for the financial years ending Dec 31 2026, 2027, and 2028 (FY26 to FY28) by 7.3%, 11.4% and 9.2%, respectively
It said the revision reflects an 8% to 20% upgrade in its order book replenishment assumptions for the forecasted years, the company’s robust run-rate year-to-date (y-t-d) as well as upsized tender book of over RM4bil.
“Investors should accumulate on dips, with stock fundamentals supported by structural growth in the chip sector, balance sheet strength and dividend upside,” it said in a note.
Despite turmoil in the Middle East causing spikes in energy costs and supply disruption of helium, which is used in wafer cooling process, RHB Research said it does not see the conflict derailing the sector’s growth as supply chains are recalibrated.
It noted that shortage in global memory chip supply has, in fact, accelerated foundry investments, and that Kelington stands at the forefront of this shift.
The research house said the group saw 42% higher y-t-d order wins on a year-on-year basis for the first quarter of FY26 (1Q26), and that management is targeting RM1.5bil to RM2bil new orders for FY26.
“Further to the RM414mil turnkey gas distribution system project secured from India’s maiden foundry on March 24, the group is hopeful of bagging another chemical package tender (of similar value) which may be announced in April,” RHB Research said.
Kelington had 95.2 million outstanding warrants as of end-4Q25, with RM131mil (15 sen per share) in proceeds should they be exercised prior to the expiry date of July 24, 2026. “We see this as supportive of higher dividends going forward, backed by its solid net cash balance (RM198mil in 4Q25),” the research house said.
It added that in FY25, the group marked a record high dividend payout ratio of 66.4%, with two rounds of special dividends declared in 3Q25 to 4Q25.
Additionally, RHB Research said it expects to see maiden earnings from the group’s foray into the renewable energy sector in FY26.
Kelington is involved in the construction of upgrade facilities for the production of bio-compressed natural gas and the setting up of a two-MW electrolyser plant for the production of green hydrogen, the research house said.
“Discussions are ongoing for new on-site gas supply ventures to drive longer-term recurring revenue for the industrial gas business,” it added.
RHB Research has maintained its “buy” call on the stock, with a raised target price of RM6.80, up from RM6.50 previously.
