KUALA LUMPUR (Feb 10): Kelington Group Bhd (KL:KGB) is well positioned to secure its first ultra-high purity (UHP) contract in Europe, with tender results likely to be announced by mid-year, according to RHB. 

In a note on Monday, the company is competing for several high-profile projects, including a new fabrication plant in Dresden, Germany — a joint venture between Taiwan Semiconductor Manufacturing Company (TSMC) and NXP, potentially valued at RM900 million. 

This project alone could account for 35% of the RM2.6 billion tender pipeline as of the third quarter of FY2024, it said. 

Besides that, RHB added that the ongoing Sino-US trade tensions and advancements in artificial intelligence (AI) models by companies like DeepSeek — delivered at notably lower costs — have further boosted Kelington’s prospects.  

These developments present indirect advantages for the company, as China intensifies its efforts to enhance its semiconductor production capabilities and achieve greater technological self-sufficiency. 

Kelington’s long-established relationship with China’s largest chipmaker and foundry, positions the company to play a crucial role in supporting the expansion of China’s semiconductor sector, particularly through additional UHP projects.  

The research house expressed optimism about Kelington’s performance in FY2024 as well, projecting a seasonally stronger fourth quarter, and a 20%-30% year-on-year increase in profit after tax and minority interest (Patami), potentially setting the stage for a record performance for the construction and engineering firm. 

The research house noted that the company’s focus on improving profitability — by shifting towards higher-margin UHP projects and expanding its industrial gas business — is expected to result in a net profit margin of 8%-9% for FY2024, up from 6.5% in FY2023. 

RHB maintained a “buy” call on Kelington Group, with a target price of RM4.12.   

At the time of writing on Monday, Kelington Group’s shares were unchanged at RM3.44, valuing the company at RM2.48 billion.