,KUALA LUMPUR: Following a large surprise job win, Kenanga Research has reaffirmed Kelington Group Bhd as its top hidden gem pick with expectations for further jobs down the road."KGB remains our top hidden gem pick owing to its healthy job pipeline and secular growth story," it said in a note, while reiterating its "outperform" recommendation.Despite recently landing a mammoth job, the research house expects Kelington to have sufficient resources to take on more jobs as the recent completion of one of the large projects in Penang frees up resources for the group to take on the new contract."Note that the relationship of higher revenue recognition and overhead expense is nonlinear, which means KGB is able to enjoy economies of scale and better margin as we anticipate the group to achieve back-to-back record revenue and earnings for FY21 and FY22," it said.The group's prospects are further supported by an elevated tender book of RM1.1bil.Yesterday, the group announced that it had secured a job win worth RM430mil, which brought its year-to-date order wins to RM764mil and doubled its existing order book to RM822mil.According to Kenanga, this brings the group's order book very close to its current market capitalisation.The job, which its the group's largest-ever job win, comes from a US-listed seminconductor manufacturing company at Sama Jaya Free Industrial Zone in Kuching to undertake a turnkey construction for an entire new semiconductor fab, focusing on memory chips.Kelington is tasked with handling the whole project, involving all three of its business segments (UHP, Precision Engineering and General Contracting).The job will begin immediately and is slated to be completed by end-2022 as the US customer is urgently in need of new capacity to accommodate the surging demand for its memory and data storage products."This is in line with our observation on the tech space that chip shortage will remain in the foreseeable future as the surge in semiconductor demand continues to outpace capacity expansion," said Kenanga.The research house raised FY21-22 earnings forecasts by 4% and 33% to RM32.3mil and RM47mil, which represents growth of 85% and 46% respectively.It raised its target price in tandem to RM2.50 from RM1.50 previously on FY22 price-earnings ratio of 33x.
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