KUALA LUMPUR (Aug 15): RHB Research expects Kelington Group Bhd (KL:KGB) to deliver another quarter of strong earnings, on the back of a solid order book.
“We expect the strong year-on-year/quarter-on-quarter growth in revenue and core earnings to continue, supported by a solid RM1.3 billion order book (as of end-March) and favourable product mix”, RHB said in a note on Thursday. KGB is slated to announce its results for the second quarter ended June 30, 2024 (2QFY2024) on Aug 21.
“We gather that new job wins exceeded RM500 million in the first half ended June 30, 2024 (1HFY2024), with the majority coming from China, where tenders were aplenty," RHB added.
The house maintained its 'buy' call on KGB, with a higher target price of RM3.90 (from RM3.85) and 2% FY2024 yield.
Meanwhile, there are strong tailwinds continuing well into FY2025, with chipmakers benefitting from strong demand for products related to data centres and generative artificial intelligence, the note read.
KGB is tendering for two key projects in Germany, potentially valued at RM300 million to RM400 million, which if successful will further bolster its order book.
The industrial gas segment has consistently raked in a superior gross profit margin of over 30% versus 15% for the conventional business over the past three financial years.
The new P2 plant, which has a 70,000-tonne capacity, is expected to drive a new leg-up in earnings with growth spurred by robust demand from the markets in Oceania, Africa, and India.
KGB recently acquired the remaining 9.3% stake in Ace Gases for RM35.7 million via a cash consideration of RM10.1 million and the issue of 7.6 million new shares in KGB.
“We view this positively, as it allows the company to fully consolidate earnings from the industrial gas business, which is gaining traction via expansion and capacity growth”, RHB added.