Strengthening competitive edge

HAVING built a strong track record of serving major semiconductor manufacturers, engineering services company Kelington Group Bhd remains positive about the industry’s long-term outlook, supported by growing demand for advanced chips, artificial intelligence (AI) and high-performance computing.

Chief executive officer (CEO) Lim Seng Chuan says as semiconductor technologies become more sophisticated, manufacturing processes require increasingly stringent controls, particularly in the delivery of ultra-high-purity (UHP) gases and chemicals.

“This creates opportunities for specialised engineering solutions that are critical to supporting advanced semiconductor manufacturing,” Lim tells StarBiz 7.

Kelington serves industries that require UHP gases and chemicals for specialised applications. Year-to-date, the group has secured a record RM4.34bil in new contracts, providing a strong foundation for future growth, Lim says.

“Our focus now is on disciplined project execution, effective cost management and converting our substantial order book into sustainable earnings,” he adds.

As one of the 88 companies participating in the MY Value Up programme, a national capital market initiative jointly led by the Securities Commission and Bursa Malaysia, Lim says the company is actively working on the key strategic pillars underpinning its MY Value Up plan, focusing on scaling its core business, expanding regionally, growing recurring income and improving profitability.

“We want to build on our existing strengths while positioning Kelington to capture new opportunities and sustain growth over the longer term.”

According to Lim, Kelington is at one of the “strongest” points in its history in terms of shareholder returns.

“The MY Value Up programme is about taking Kelington to the next level. We have built a strong foundation, and our focus is on building on that foundation – scaling our core business, expanding regionally and strengthening our earnings base to deliver sustainable growth and lasting value for our shareholders.”

Over the years, the company has reinvested earnings from its core engineering business into income-generating assets, including its plant in Kerteh and an investment in an air separation unit in India.

These investments are part of the group’s efforts to diversify its earnings base and build more predictable income streams alongside its project-based business, Lim says.

Moving forward, capital allocation will play an important role in Kelington’s next phase of growth. Lim says the company will continue to explore strategic acquisitions, partnerships and investments including opportunities to broaden its technological expertise.

“Ultimately, we want to ensure that our investments create meaningful synergies with our core business, generate attractive long-term returns and enhance value for our shareholders.

“At the same time, we recognise the importance of sharing the benefits of our growth with shareholders,” he says, adding that the company’s dividend policy provides for a minimum payout of 25% of annual net profit.

“ As our recurring income grows, we will continue to assess opportunities to enhance shareholder returns while ensuring that we retain sufficient capital to fund future growth.”

For the six months ended June 30, 2026 (1H26), the company made a net profit of RM71.7mil, compared with RM59.5mil in the same period a year earlier.

It paid dividends of six sen per share for the 1H26, up from five sen per share in the corresponding period last year.

Industry challenges

One of the key challenges facing Kelington is keeping pace with the increasingly complex requirements of the semiconductor and other high-tech industries while expanding into new markets.

Lim notes that as technology advances, projects require more sophisticated solutions, specialised engineering expertise and closer coordination across different disciplines.

At the same time, entering new markets such as India brings its own challenges, including understanding the local business environment, navigating regulatory requirements, building relationships and establishing the right capabilities on the ground, the CEO adds.

“We also need to manage costs, develop skilled talent and deliver projects efficiently while meeting growing expectations around sustainability.

“Our approach is to strengthen our technical capabilities and people while building the right partnerships in each market.

“For example, our collaboration with Tata Electronics provides an opportunity to strengthen our presence in India and work with an established industry player.”

Kelington also takes a strategic approach by pursuing government-supported semiconductor projects, which can provide opportunities to establish its presence in new markets while contributing to the development of the local semiconductor ecosystem.

“Ultimately, technology adoption alone is not enough. We need the technical know-how to apply it, the right people to execute it, and the ability to integrate different systems and disciplines effectively.

“This is why we continue to invest in innovation, develop our workforce and improve project execution,” the CEO says.

Lim says the group also sees opportunities to apply its engineering expertise to solutions that improve resource efficiency and support lower-carbon operations.

Looking ahead, the company sees three key areas for growth.

First, it wants to expand its geographical reach by strengthening its presence in existing markets and entering new markets where it sees strong potential.

Second, it says it wants to deepen its level of service by building stronger customer relationships, taking on more complex projects and supporting customers across more stages of their operations.

“Third, we want to broaden the range of services we offer by leveraging our engineering expertise to provide more integrated solutions and address a wider range of customer needs,” Lim says.

He notes that there is also potential in sustainable engineering solutions.

“As industries place greater emphasis on energy efficiency, resource conservation and carbon reduction, we believe our engineering capabilities can help customers improve operational efficiency and move towards more sustainable operations.”

Kelington will continue to explore opportunities in areas such as energy efficiency, water treatment and low-carbon solutions where it can apply its expertise and create long-term value, Lim adds.

“Alongside these opportunities, we will continue to grow our industrial gases business and build more recurring income streams to strengthen our earnings base.

“Ultimately, our ambition is not simply to grow with the industry, but to strengthen Kelington’s competitive position.”

At last look, its shares were trading at RM8.47 apiece, valuing the group at about RM7.48bil.