KGB: New Semiconductor Contract Boosts Orderbook and Valuation, ‘Buy’ Rating Affirmed
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent major semiconductor-related contract win in Singapore has significantly bolstered a company’s orderbook, reinforcing a positive outlook for future earnings and leading an investment bank to reiterate its “Buy” recommendation. The new project is expected to drive strong earnings momentum and justify a valuation expansion.
Performance Review
The company’s wholly-owned subsidiary, Kelington Engineering (S), recently secured a bulk gas distribution piping system project in Singapore. Valued at SGD33 million (approximately MYR108 million), the contract was awarded by a leading US-based semiconductor manufacturer.
This project is specifically for the customer’s high-bandwidth memory (HBM) advanced packaging facility, a first for Singapore, catering to the burgeoning demand for artificial intelligence (AI) chips. Works are set to commence immediately, with completion targeted for December 2026. The group has a well-established relationship with this client, having successfully executed multiple ultra-high purity (UHP) and advanced engineering (AE) jobs previously.
Future Outlook
With the latest Letter of Award (LOA), the group’s year-to-date orderbook has climbed to an estimated MYR1.1 billion, effectively matching the total MYR1.1 billion secured for the entirety of 2024. The total tenderbook, adjusted for recent wins, now stands at an impressive approximately MYR4 billion.
Analysts anticipate further order wins in the fourth quarter of 2025, which are expected to push cumulative orders to an all-time high. Key upcoming tenders include significant projects in Dresden (c.MYR1.4bn), India (c.MYR1.1bn), China/Hong Kong (c.MYR0.6bn), and additional Singapore projects (c.MYR0.6bn). The group is also actively engaging with Japan’s Rapidus and a US-based chipmaker for new facilities.
Valuation and Recommendation
The investment bank maintains its forecasts, noting that the new contract aligns well within existing orderbook replenishment assumptions. The company is seen as possessing “scarcity value” and “strong earnings momentum,” which justifies a valuation expansion. This is further supported by robust earnings execution, a healthy tenderbook pipeline, and progressive margin expansion.
The target price for the stock has been raised to MYR6.10 (from MYR5.55), implying a 13% upside from the last traded price of MYR5.40. This revised target price is pegged to +0.5 standard deviation of the Bursa Malaysia Technology Index’s historical P/E mean. The “Buy” rating is affirmed. Key risks include weaker-than-expected order replenishment, lower-than-expected margins, and delays in project execution. The target price also incorporates a 6% ESG premium, reflecting the company’s strong overall ESG score of 3.3 (Excellent).
