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KUALA LUMPUR (Nov 11): Pharmaceutical company Pfizer’s announcement of a viable Covid-19 vaccine candidate bodes well for many players in the market, including Kelington Group Bhd (KGB), which may benefit from a boost later in the demand for dry ice.
With a vaccine candidate in the works, dry ice is now seeing increased demand from pharmaceutical companies working on the vaccine, as well as increased use for the food delivery service. NBC News reported.
“Coincidentally, the KGB has a dry ice plant located in Shah Alam, which places it well to benefit from this increased demand,” Kenanga research analyst Samuel Tan wrote in a note today.
More importantly, the availability of a vaccine paves the way for a full economic reopening, also facilitating KGB’s ultra-high-purity (UHP) installation jobs segment, Tan said. The group primarily provides gas delivery solutions. UHP to the electronics and semiconductor industry.
Kenanga maintained its ‘outperforming’ rating on the stock with an unchanged price target of RM1.92.
“Currently, KGB’s outstanding order book has accumulated to a record RM 386 million compared to RM 258 million at the end of fiscal year 2019. This means that as the economy reopens, there is a huge backlog. of jobs that the KGB must deliver. In fact, the KGB has already resumed its operations in Malaysia, Taiwan and China, while operations in Singapore have returned to 75% from the previous 30%, ”he noted.
Tan notes that the market is currently underestimating KGB’s earnings potential in fiscal year 21, but believes it is primed for a strong earnings recovery supported by a record order book, an impending water shortage that requires further expansions, as well as China’s semiconductor localization efforts. .
“To put things in perspective, the KGB already achieved after-tax (PAT) profits of RM24.4 million in FY19 even with around RM1 million in initial losses for its liquid CO.2 plant and around RM2 million of idle losses in the Taiwan division.
“For fiscal year 21, we forecast that liquid CO2 plant to start generating profit of RM3-RM4 million, while Taiwan also makes profit of RM2 million. With its highest order book ever, we believe that we too remain conservative with our fiscal year 21 PAT of RM26 million, ”said Tan.
At the time of writing, Kelington shares were up 11 sen or 8.09% at RM 1.47, for a market capitalization of RM 474.26 million.
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