Stock to Watch - KGB & KGB-WA

Kelington Group BHD (KGB 0151)

Fundamental

One of the leading Ultra-High Purity (UHP) Gas and Chemical delivery solution provider within the regional footprint of Malaysia, China, Taiwan and Singapore

Business Segment

1. Design and Modelling

2. Fabrication and Installation

3. Quality testing and certification

4. Control and instrumentation

5. Maintenance and servicing

Current outstanding order-book of RM175 Million

-The Ultra High Purity mechanical and electrical services and medical system for Kang Hui Maternity Centre Services (Shanghai) Co (remaining value of RM99m)

-The total facilities management services to one of the world’s largest chip manufacturers (remaining value of RM18m)

-The UHP system design for TTE Engineering (remaining value of RM8m)

- Remaining RM50m is contributed by other semiconductors, O&G, plantation and healthcare players

Current tender-book

- Taiwan’s biodiesel contract (worth RM35m) has been delayed due to the longer-than-expected approval process, management remains optimistic in securing it by 2H2014

-Inclusive of other tender jobs for one of Malaysia’s hospitals SGD30m the tender book value has already hit RM110m.

Kelington Group BHD is one of the turn-around company which earning slipped in 2013 due to the lack of outstanding order-book. However group return to be profitability after securing an amount of project, 2.7 times as more order as to compare to FY2013. Take 6% as the average benchmark Profit-Margin, the group will be easily standing on at a comfortable profit of RM10.5 Million divided by the weighted average number of share of 191 Million, staggering around 5.4cents earning per-share. Assume it is trading at 10 times fair PE ~ it will be easily valued at Rm0.54 cents

Target Price RM0.54

Technical Analysis

KGB has challenged the previous high when I posted on 13 July 2014. However, the unstable market sentiment brought the price to retest support. The support is firm and price has rebounded from the support.

Judging from the strong trading volume and positive momentum indicators, I believe it will trigger another round of buying interest and it possible will bring the price to uncharted territory.

Target Price 1 = RM0.48 (+9.1%)
Target Price 2 = RM0.52 (+18.2%)
Cut Loss = RM0.41 (-6.8%)

Target Price 1 = RM0.25 (+18.8%)
Target Price 2 = RM0.30 (+42.9%)
Cut Loss = RM0.20 (-4.7%)

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