Summary for Kelington Group Berhad (KGB 0151)
Background (From
Bloomberg Businessweek)
Kelington Group Berhad provides
engineering solutions for ultra high purity (UHP) gas and chemical delivery
systems in Malaysia, Singapore, Taiwan, the People’s Republic of China, and
others. The company provides design and modeling services, such as site
analysis, feasibility studies, budget planning, conceptual design, capacity
analysis, and pre-commissioning, commissioning, and start up services;
fabrication and installation services; quality testing and certification
services; and control and instrumentation services. It also offers maintenance
and servicing services, including replacement of faulty gas or chemical
delivery system components, modification or conversion of applicable equipment,
installation of additional distribution points in a gas or chemical delivery
system, and programmable logic controller program medication for equipment,
such as gas cabinets, VMB/VMP, and abatement systems. In addition, the company
engages in the trading of machinery equipment and related parts and components.
Kelington Group Berhad serves electronic, wafer fabrication, photovoltaic,
TFT-LCD/LED, medical substrate/PCB, pharmaceutical and biotechnology, and
medical and healthcare industries, as well as R&D laboratories and
government services. The company was formerly known as Kelington Engineering
Sdn Bhd and changed its name to Kelington Group Berhad in September 2008.
Kelington Group Berhad was founded in 1999 and is headquartered in Shah Alam,
Malaysia.
Extracted From The
Edge
1. KGB pre-tax profit for the first quarter ended March 31, 2014 more than
doubled to RM2.37 million, from RM997,000 recorded in the same period last
year. Revenue jumped to RM53.07 million, from RM24.02 million previously. The
company attributed the better performance to higher revenue contribution from
its overseas operations.
Revenue from China increased by 481.84 % to RM35.76 million, while revenue from
Malaysia rose 3.39 % to RM12.22 million. Moving forward, the group said it was
committed to secure new orders to replenish its order book, whereby since the
beginning of the year, it secured new orders totalling RM63.72 million as at
March 31 this year. “We are optimistic of achieving satisfactory performance
for the financial year ending Dec 31, 2014, as we have an order book of
RM227.97 million of which RM174.90 million remains outstanding as at March
31.’’ It said.
2.
Initiating
coverage with buy call and target price of 55 sen. The group is back in
business with its strong earnings rebound this year backed by the promising
outlook for the semiconductor and healthcare industries. KGB is a provider of
ultra-high purity (UPH) gas and chemical delivery solutions in the region. Its
strong presence overseas has helped them to secure sizeable contracts in
competitive markets such as China, Taiwan and Singapore.
The group posted a dismal performance in FY 13 as its profit had slumped 72.1%
y-o-y. But it made an impressive recovery in its first quarter ended 1qFY14 by
posting net profit of RM2.1 million, a whopping jump of 156.5% y-o-y (against
1qFY13’s RM0.8 million) and 700% q-o-q (against 4QFY13’s RM0.01 million).
Based
on its current outstanding order book of RM188 milion and maintenance works
which render yearly, the group is expected to make a strong comeback in FY14
with us forecasting a net profit of RM8.6 million (+400% y-o-y), 2015FY net
profit of RM10.8 million (+26& y-o-y).
The
healthcare sector currently contributes about 72% to the group’s order book
values while semiconductor industry contributes about 14%. The recovery in the
global semiconductor industry augurs well for Kelington as the group will be
able to secure more contracts in relation to the industry’s rising capital
expenditure.
Kelington
has been consistently rewarding its shareholder since its listing in 2009 and
expect the group to resume its generous dividend payment of two sen for FY14
and 2.5 sen for FY15 or equivalent to 50% dividend payout, which translate into
an attractive dividend yield of 4.9% and 6.1%, respectively.
From Bloomberg Terminal
Technical Analysis
Conclusion:
The recovery of semiconductor industry has been an added value for KGBin
expanding its order book value and main revenue contributor, healthcare is a
recession proof industry which it wouldn’t affect the revenue drastically. The expanding healthcare
industry is due to the increasing wealth of people, thus, it demand for higher
quality services, which pretty much help the revenue of KGB increasing steadily.
Short term Target Price: RM0.45
Midterm Target Price: RM 0.55
Cut loss : RM 0.385
Dividend
Payout ratio ≈ 50%
Happy
Trading!
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