First Read: Kelington Group Berhad "Timing-driven soft Q1, though supported..."

研报英文原文证据摘录

First Read: Kelington Group Berhad "Timing-driven soft Q1, though supported..."

Forecast returns

Forecast price appreciation -14.1%

Forecast dividend yield 1.9%

Forecast stock return -12.1%

Market return assumption 8.6%

Forecast excess return -20.7%

Company Description

Kelington is an engineering outfit established in 1999. Its key solution offerings include ultra-

high-purity (UHP) gas and chemical delivery systems used in semiconductor manufacturing

facilities, as well as process engineering, cleanroom construction and general civil

construction. It is also involved in manufacturing and trading of specialty gas through its

wholly-owned subsidiary Ace Gases.

Valuation Method and Risk Statement

We value KGB using a 24x target PE (1SD above 5-year historical average) on 2027E

earningsestimates. Key upside risk would be stronger-than-expected semi production

capacity expansion in China, the market which KGB has established its presence on since the

2000s. Although KGB has increasingly seek geographical diversification over the years to

improve its profit margins, we think the Chinese Tech supply chain's move to achieve self-

sufficiency could translate into robust fab expansion project pipeline which could translate

into better-than-expected tender opportunities for KGB. Meanwhile, we think M&As which

KGB could potentially pursue in the US to capture the fab expansion pipeline there could be

another upside risk. Key downside risk would be potential overcapacity especially for mature

foundries, as we note that the markets which KGB is expanding in primarily have sizeable

pipelines of mature foundries. Mature foundries have lower barrier of entries relative to

leading-edge foundries or memory fabs, and we think overcapacity could still lead to tenders