KUALA LUMPUR, Nov 9 — Kenanga Research has assigned an outperform call on Kelington Group Bhd’s (KGB) shares with a target price of RM1.92 per unit, as the sentiment overhang due to a possible ban on KGB’s biggest ultra-high purity (UHP) gas client is expected to dissipate.
The research house noted that KGB’s share price had been under pressure following the United States’ (US) possible ban on Semiconductor Manufacturing International Corporation (SMIC), KGB’s biggest UHP client.
“With Joe Biden winning the US election, we believe sentiment overhang on SMIC and hence KGB is now cleared, more so as the Democrats have not gained full control of the Senate, making harsh policies on China tech companies difficult to be imposed,” it said in a note today.
It said KGB’s orderbook surged to a record high of RM386 million — including RM61.8 million awarded by SMIC recently — from RM258 million at the end of financial year 2019.
The research firm said KGB provides UHP gas delivery systems used in wafer foundries, which are currently being thrusted into the limelight given record-high foreign direct investments, imminent wafer shortages (which would subsequently require further expansions) and China’s semiconductor localisation efforts.
“We believe the market is grossly underestimating KGB’s earnings potential as the stock only trades at 15.6 times, significantly cheaper than peers’ average of 30-58 times,” it said.
At 12pm, KGB’s share price was five sen higher at RM1.32. — Bernama
