The engineering services, construction and general trading company’s earnings forecast for 2023 has been raised by 5% to factor in the higher-than-expected orderbook that will come with its new contract.

Kenanga’s research arm noted that the contract was one of the group’s largest non-turnkey awards, which typically yield better margins.

The group’s current orderbook has now swelled to RM1.87 billion, which would provide very solid earnings visibility for this year and next year, it said.

“We observed that although the size of UHP contracts awarded is growing, the manpower requirements do not increase linearly,” it said in a research note.

Kenanga said this was attributable to the group’s effort in fabricating its proprietary gas equipment two years ago which started to garner customers’ favour, thus contributing to higher contract value with a similar size workforce.

Hence, the research house has maintained its “outperform” call on the stock with a higher target price of RM1.70.

Kelington Group’s wholly-owned unit, Kelington Technologies Sdn Bhd, has secured a UHP contract worth about RM330 million from a global semiconductor solutions company to undertake the bulk and specialty gas system distribution works for the customer’s expansion of its manufacturing facility in Kulim.

Similarly, Malacca Securities Sdn Bhd said the contract is expected to generate mid-to-high single-digit earnings before interest, taxes, depreciation, and amortisation (Ebitda) margins, which is in line with the historical average for UHP works.

“Consequently, we have raised our orderbook replenishment to RM1.5 billion for this year, while keeping next year’s target unchanged at RM1 billion,” it said.

At 10.22am, Kelington Group’s share price increased three sen to RM1.27 with 845,400 shares transacted.