Kelington on the rise

WITH its toppish valuation and the strong backing it has from analysts, industrial gas specialist Kelington Group Bhd paints a pretty picture.

The only risk it faces is in execution.

One of the main reasons analysts continue to call a “buy” on this stock, which already trades at a historical price-to-earnings (PE) of 38 times, is that it has garnered significant orders from countries such as India and Japan.

India stands out – not only is the sub-continent known for its ambitious and big spending attempts to leapfrog into the semiconductor sector, but the maiden project Kelington secured there is linked to the country’s key company in its semiconductor push – Tata Electronics.

Kelington won a US$105mil turnkey gas distribution contract for what it says is “a semiconductor wafer fabrication facility” in Gujarat, India.

It has also clinched a US$10.4mil purchase order for gas purifiers for the same facility, and inked several letters of intent for projects to the tune of US$17mil from the same facility.

While Kelington did not say it is Tata, research houses covering Kelington have made mention that the group’s client in India is Tata.

The Indian government and Tata are spending some US$11bil to build India’s first commercial 300mm (12-inch) wafer fab at Gujarat.

Despite analysts’ exuberance over Kelington’s Indian foray – UBS Global Research, for example, says the project win underscores the merits of Kelington’s strategy of participating in tenders in new markets – Kelington group chief executive officer Lim Seng Chuan remains prudent in ensuring the company is sufficiently diversified, geographically.

“India presents a lot of opportunities for us. But apart from India, we also have a footprint in other markets,” he tells StarBiz 7, adding that the new project is particularly significant because it involves India’s first full-fledged pure-play semiconductor foundry.

While Kelington’s core markets are Singapore, Malaysia, China and Taiwan, it has expanded into India, Japan and Europe.

Lim says the group has “many more” tender opportunities in India, pointing to additional fabs planned in Gujarat and other projects emerging in Hyderabad and areas near Delhi.

He says Kelington is also preparing to bid for other jobs that typically follow the initial infrastructure phase.

Kelington provides engineering solutions such as ultra-high purity gas and chemical delivery systems for semiconductor manufacturing facilities.

It also does cleanroom construction and general civil construction.

The group manufactures industrial and specialty gases and undertakes related gas infrastructure projects.

Japan could also emerge as another sizeable market for the group.

Lim says Japan’s semiconductor industry has been revitalised in recent years following major investments by players such as Taiwan Semiconductor Manufacturing Co Ltd in Kumamoto, alongside capacity expansions by memory chip makers in Hiroshima and Hokkaido.

State-backed semiconductor manufacturing firm Rapidus Corp is building a two-nanometre semiconductor plant in Chitose, Hokkaido – this is Japan’s first advanced logic semiconductor manufacturing facility.

“We have submitted a tender for a project in Hiroshima. It is quite a big one and we expect to know the outcome later this year,” he says.

Kelington’s order book stands at close to RM2bil, with India emerging as the group’s largest market by order book contribution at RM539mil.

The group’s tender book stood at RM5.3bil as at end-March 2026, with Singapore, Malaysia and India accounting for the top three markets at 40%, 35% and 17%, respectively.

The RM5.3bil tender book does not yet include opportunities currently being pursued in Japan, as those tenders were submitted after 1Q26 and will only be reflected in the 2Q26 figures, Lim further notes.

One of the key reasons for Kelington’s growth, he says, is the group’s move to follow its key customer’s footprint.

According to Lim, customers like Infineon Technologies, Siltronic and Texas Instruments often engage Kelington to participate in projects overseas.

“Pricing is important, but so is track record. Customers want the most competitive solution, but more importantly, they need to know that you can deliver.

“If a facility cannot be brought online on time, they can lose millions every day. This has helped us secure opportunities in new markets like Dresden, Germany.”

The artificial intelligence (AI) boom is also fuelling fresh opportunities for Kelington, with rising demand for high-bandwidth memory chips. Lim says a growing portion of the group’s tender pipeline is linked to memory fab expansions, as chipmakers ramp up capacity.

“Our expertise, especially in advanced engineering, positions us well to benefit from the AI boom. Our key customer is expanding in Singapore. Recently, they announced the groundbreaking of what is expected to be the biggest fab in this region with an investment of about S$30bil.

“This is why there is a significant increase in our tender book in Singapore. We are currently working on one of their pilot plants, called the Lighthouse Project. It is about 20% to 30% complete and a much larger project is coming. That project is also related to memory chips for AI.”

Lim says Europe continues to present growing opportunities for the group, with semiconductor investments continuing to gain momentum under the European Chips Act.

“We secured our initial job in Dresden last year, having already established a presence in Finland. One of the key reasons we were able to enter Germany was because we had done a good job in Finland.

“With the European Chips Act, many countries such as Germany, France, Italy and Spain are building new fabs. From Germany, we are expanding our reach into other European markets, including France, Italy and Malta.”

While project execution in Europe may progress at a slower pace, Lim says he has yet to see any delays to semiconductor investments there.

“As far as we can see, the advanced engineering segment is going to be very, very busy over the next three to five years.”

Lim says that any capacity expansion by the group is likely to come from its industrial gases segment.

The group’s two liquid carbon dioxide plants are operating at close to 80% utilisation, while opportunities are emerging in its on-site gas supply business. Kelington operates several plants in Malaysia and sees potential for growth in other regions.

Kelington is also exploring opportunities in sustainable engineering solutions such as carbon capture, green hydrogen and Bio-CNG which is compressed biogas, a purified, renewable form of biogas made from organic waste.

The group is building its capabilities through industry collaborations and pilot projects.

However, Lim notes that these initiatives remain at an early stage and their prospects depend on the carbon tax framework and incentives the government introduces.

“The government is expected to introduce a carbon tax at some point, so we are getting ourselves ready. We see opportunities in the technologies we are developing. These solutions will require plant investments, and depending on the volume of waste gas we are able to process and trade, we can charge service fees.

“Over time, this could develop into a long-term business opportunity,” Lim says.