Kelington Group Berhad "Firing up all cylinders" (Buy) Koh

Research evidence excerpt

Kelington Group Berhad "Firing up all cylinders" (Buy) Koh

s.

Japan, India, and previously in Europe. By expanding geographical footprint, we think it 12/26E 0.23 0.23 0 0.23

has allowed Kelington to reduce its exposures to general contracting to pursue 12/27E 0.26 0.30 16 0.27

advanced engineering opportunities which typically yield higher margins. We estimate 12/28E 0.27 0.31 12 0.28

that Kelington will derive ~35% of its RM2.4bn annual project wins from new markets

such as India, Japan and Europe. Joseph Koh

Analyst

joseph.koh@ubs.com

A multi-year runway

+603-2781 1182

We do not think Kelington's strong project win momentum is a one-off event in 2026E.

We noted that majority of Kelington's recent project wins and existing tenders are for

the base builds of critical infrastructures (ie gas delivery systems) for new semiconductor

facilities. Kelington's differentiation from a civil construction firm is that its working

relationships with its key customers are not one-off. With good project execution and

timely delivery, Kelington will stand a good chance to be called for subsequent hook-up

works as these new semiconductor facilities ramp up their productions.

Valuation: reiterate Buy rating, raising PT from RM6.30 to RM9.00

We raise our earnings forecasts for 2027E/28E by 14%/10% to account for the ~35%

increase in our project win assumption. We take into account the 12% dilution impact

from the full conversion of Kelington's outstanding warrants. We derived our price

target using a target PE of 30x on 2027E EPS (+2.5SD vs 5-year mean), noting that its PE

has also re-rated in the past to >30x in 2021-22 when the company achieved its previous

record-high project win of RM1.8bn.

Highlights (RMm) 12/23 12/24 12/25 12/26E 12/27E 12/28E 12/29E 12/30E