Kelington Group

Kelington Group

Postby winston » Sun Jan 21, 2018 8:13 am

not vested

Stock pick: Kelington Group Bhd
Share price: 80.5 sen

Kelington is a leading regional provider of ultra high purity (UHP) gas and chemical delivery solutions for the high technology industry.

Barriers to entry are rather high in this industry as the provider needs to have a good safety track record and the trust of the clients.

We like the company as it has proven business with multinational clients such Intel, TSMC, Infineon, Q Cell, BASF and Petron. It is noted that China has a development plan that will last until year 2025 to invest heavily in the semi-onductor industry to increase manufacturing capacity of memory chips and integrated circuits.

Analysts forecast that there will be a record spending of more than US$60bil in the semicon industry in 2018 globally, on top of an expected US$50bil in 2017. It is likely that each of such facilities will need UHP gas delivery system and Kelington is in a sweet spot to secure some of these contracts.

To complement its engineering business, the company has ventured into the supply of industrial gases, such ie nitrogen and carbon dioxide (CO2) in FY2018. The company provide on-site supply of nitrogen gas for the technology industry and other manufacturers.

It has signed a RM20mil 10-year contract to supply nitrogen gas to Hanwha Q Cells, one of the world’s largest manufacturers of solar cells and modules. We expect more such contracts to come in the near future.

It intends to build a 50,000 tonnes/year liquid CO2 plant in Terengganu with a feed-in supply from Petronas. The company expect to supply CO2 to meet the rising demand from the food and beverage industry with a potential revenue of RM1bn over the plant’s lifespan. CO2 is used to manufacture carbonated drinks and for food freezing.

Overall, we expect Kelington’s earnings to grow 20% to 30% annually over the next two years with growth from UHP engineering contracts in 2018 and industrial gas supply in 2019.


Source: CHOO SWEE KEE, TA Investment Bhd CIO
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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winston
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