KELINGTON Group Bhd (KGB) has been offering ultra-high purity (UHP) gasoline distribution options to the electronics and semiconductor business since its inception in 2000.
Though it has diversified its actions through the years into course of engineering (PE) and normal development (GC), whereas progressively increasing its buyer base to incorporate non-semiconductor clients, the UHP enterprise stays its primary focus. bread and butter.
About two years in the past, KGB ventured into the economic and specialty gasoline enterprise, estimated to be price RM1.4-1.5 billion within the Malaysian market alone. The phase ought to now change into the group’s new progress engine.
“As a gaggle, our whole order backlog (for all corporations) has grown at a compound annual progress charge (CAGR) of 15% to 18% over the previous 5 years. Since semiconductors are on the rise and we’re aggressively increasing into the economic gases sector, I imagine we should always be capable of keep our progress momentum over the subsequent two years, ”stated Raymond Gan Hung Keng, Founding CEO of the KGB. Edge in a digital interview.
KGB was listed on the ACE market of Bursa Malaysia in 2009, earlier than migrating to the primary market in 2012. At present, the group has operations and workplaces in Malaysia, Singapore, China and Taiwan.
Gan, 57, is a significant KGB shareholder with a 21.75% stake, of which 21.02% is held by way of Palace Star Sdn Bhd, a non-public car co-owned by him, Steven Ong Weng Leong and some different companions.
Ong, 53, is an govt director and chief working officer of the KGB. In keeping with him, the group is on the verge of driving the semiconductor growth as a result of there isn’t a signal of slowing spending or growth of multinationals (MNCs), regardless of the uncertainties brought on by the Covid pandemic. 19 and the US-China commerce conflict. .
“Semiconductor gamers will all the time be our primary clients. What we love about semiconductors is that the business has to proceed to develop because the know-how evolves. This isn’t the everyday manufacturing business the place you construct a manufacturing unit and it might take 20 years. For semiconductor corporations, they should hold investing in new wafer manufacturing crops, which suggests extra initiatives for us. It is like an business that is all the time booming as a result of we’re nonetheless chasing them, ”says Ong.
The UHP enterprise represents roughly 60% to 70% of the full turnover of the KGB, an extra 20% of the PE phase and the remaining 10% of GC.
“Our PE division primarily designs and builds mechanical and electrical techniques that help industrial processes in varied industries, whereas our GC division is supporting clients with our full vary of contract and development administration providers. We construct giant and small scale factories for petrochemical and oleochemical corporations. We additionally do civil engineering and development work for them, ”says Ong.
Serving high-end clients
Coming again to the UHP enterprise, KGB primarily serves high-end clients together with wafer producers, TFT LCD readers, in addition to photovoltaic (PV) photo voltaic cell producers. These clients are situated upstream of the semiconductor worth chain as a result of they manufacture built-in circuits (ICs) or chips, which is capital intensive.
Gan says semiconductor corporations making wafers and chips should function in an ultra-clean setting as a result of mud and particles can quick circuit built-in circuits.
“They want a system of ultra-clean gases and chemical substances to run into their machines, in order that there isn’t a contamination whereas they’re making wafers and reducing their chips. When there’s a defect of their chips, their manufacturing effectivity will likely be affected. That is why wafer factories have to verify the gasoline and chemical traces are tremendous clear, ”he explains.
There are solely three wafer producers in Malaysia specifically SilTerra Malaysia Sdn Bhd, Infineon Applied sciences and X-Fab.
“Immediately, a lot of the giant wafer manufacturing crops are in Taiwan and China, adopted by Singapore, South Korea and Japan. Our main clients embody Semiconductor Manufacturing Worldwide Corp (SMIC) of China, Taiwan Semiconductor Manufacturing Co (TSMC), Infineon, Seagate and Micron in Singapore, ”says Gan, including that the group established its business presence in China in the past. 18 years previous and has a robust buyer base there.
“In December of final 12 months alone, we had been nonetheless getting new orders from these multinationals, together with the SMIC, which just lately requested us to hurry up as a lot as attainable. However one factor to notice is that we’re not solely depending on the minimal wage, though it’s our greatest buyer in the mean time, ”Gan emphasizes.
“Fortuitously, we reviewed all of their 4 (SMIC) initiatives in China final 12 months. With our observe file, we’re assured we are going to obtain the identical this 12 months, ”he stated.
In the meantime, Micron and GlobalFoundries are additionally reportedly increasing their wafer manufacturing capability in Singapore, which is sweet information for the KGB, observes Gan.
“TSMC is definitely our oblique buyer, however our publicity to clients and the Taiwanese market continues to be comparatively low,” he provides.
KGB’s primary opponents within the UHP sector are PNC Course of Methods Co Ltd, listed in Shanghai, Shanghai GenTech Co Ltd, Kinetics from the US and Marketech from Taiwan.
Gan acknowledges that the big multinational semiconductor corporations are presently nonetheless cautious about spending, however he believes that when the pandemic is over, they may make investments closely and broaden aggressively.
“We count on the business to proceed to cycle by way of the subsequent one to 2 years. Regardless of the worldwide chip scarcity and regardless of the end result of the commerce conflict, we imagine the KGB will all the time be a beneficiary of the worldwide semiconductor pattern. It is going to be a busy 12 months for us, ”he says confidently.
New progress engine
Going ahead, the economic and specialty gases enterprise is anticipated to be one of many KGB’s primary progress drivers.
“Our publicity to this market phase will in all probability be round RM20 million this 12 months, which may be very low in case you have a look at the Malaysian market measurement of RM1.4-1.5 billion, but it surely additionally means a Enormous room for progress for us, ”Gan stated optimistically.
Within the industrial gasoline sector, KGB’s primary competitor is The Linde Group. The area of interest of the KGB is liquid carbon dioxide (CO), which is extensively used within the meals and beverage (F&B) business, together with carbonated drinks. Ong says the group’s plant in Kerteh, Terengganu, can produce round 50,000 tonnes of liquid CO per 12 months.
“We take the waste gasoline straight from the Petronas gasoline processing plant and convert it into our merchandise. At present, we’re working at a 50% utilization charge. We’ll develop after we attain full capability, ”he says.
Moreover F&B gamers, KGB additionally sells its CO merchandise to bottle refills, which resells them to development corporations for welding.
As well as, KGB operates a dry ice manufacturing unit in Bukit Jelutong, Shah Alam. Dry ice is basically liquid CO which is solidified and pressed into the type of ice.
“We serve airways equivalent to AirAsia and Malindo, in addition to in-flight catering Brahim’s, that are hit exhausting by the pandemic. We now primarily serve ice cream parlors, together with Baskin-Robbins, and funeral properties, ”reveals Ong.
For this exercise, the KGB’s primary market is Malaysia, adopted by Singapore.
“We nonetheless should broaden into China and Taiwan. Sooner or later, we could possibly serve durian companies, in addition to poultry and seafood companies, ”notes Ong.
Yr-to-date, KGB shares have gained 35% to shut at RM 2.28 final Wednesday, leading to a market cap of RM 732.8 million.
Commenting on the robust efficiency of the share value, Gan says it displays the arrogance of buyers who imagine within the KGB’s progress story.
“Should you consider us as a high-tech firm, our price-to-earnings ratio (PER) continues to be fairly low. Among the gamers supporting semiconductors are presently buying and selling round 60 occasions. We’re nonetheless at 30 occasions (on the time of the interview). We hope that buyers will re-evaluate us as a high-tech firm and never as a buying and selling and repair firm, ”he stated.
In keeping with Bloomberg, the meter is presently buying and selling at a historic PER of 39.9 occasions.
The KGB noticed its web revenue decline 29.9% to RM17.11 million within the fiscal 12 months ended December 31, 2020 (FY2020), because the group incurred “unavoidable direct prices” and confronted a “Longer venture schedule” on account of extra normal operation. procedures in all key markets.
On its stability sheet, KGB stays wholesome in a web money place of RM 73.6 million with whole gross money of RM 132.0 million, exceeding its whole debt of RM 58.3 million as of December 31, 2020 .