Kelington poised for further growth after listing

SHAH ALAM: ACE Market-bound provider of ultra high purity (UHP) gas and chemical delivery systems Kelington Group Bhd anticipates more and better growth opportunities after its listing exercise, which is tentatively set for late November.

Kelington’s chief executive officer Raymond Gan said the company was pursuing the listing exercise now towards garnering a higher international profile and acceptance.

Speaking to The Edge Financial Daily recently, Gan said despite its strong track record, Kelington had been denied some jobs because of its unlisted status.

“All our competitors are listed. That’s why the management studied the initial public offering (IPO),” the group’s president and chief operating officer Steven Ong added.

As it is, its impressive clientele list already includes TSMC, Promos, Winbond and Texas Instruments in the wafer fabrication sector, Hannstar Display and IVO in flat panel display as well as Suntech and Motech in the solar cells sector.

The company will be the 10th to be listed this year on Bursa Malaysia Securities Bhd, and also the first to list on the ACE Market since its name change from the Mesdaq Market last August. Kenanga Investment Bank is the adviser, underwriter and placement agent for the IPO.

According to a draft prospectus posted on the Securities Commission’s website, Kelington is offering a total of 9.71 million new shares of 10 sen each at 53 sen apiece under its IPO. There is also an offer for sale of nine million Kelington shares to selected investors at the same price.

Of the 9.71 million shares under the public issue, 960,000 shares will be offered for application by the public, 5.94 million will be placed to selected investors and 2.81 million reserved for employees and business associates.

Ong said the IPO proceeds would be used mainly for purchasing equipment and machines, working capital, and research and development (R&D).

“The industry is evolving and the need for UHP purity levels will be more stringent. We need to catch up with the industry or else we will be left behind,” he said, adding that it spent RM80,000 on R&D last year.

Operating in a very niche business area with very few players, the group’s UHP gas and chemical delivery systems are deployed in highly specialised industries such as the flat panel display and wafer fabrication sectors and emerging industries such as the solar energy, pharmaceutical, light emitting diode (LED) and bioscience sectors.

Kelington designs the gas cabinets and piping systems for the supply of UHP gas to the “clean room” in factories where high-end semiconductors and other related devices are manufactured.

UHP gas is needed as these sensitive electronics must be handled in a dust-free environment as any contamination of a single particle will cause defects.

In a presentation slide shown to The Edge Financial Daily, “the estimated loss when a wafer foundry shuts down is about RM1 million per day”.

Kelington posted a net profit of RM6.6 million on the back of RM60 million revenue for its financial year ended Dec 31, 2008. It has consistently seen a 30% growth annually, even during times of financial crisis.

“We are not just serving one industry, but many such as semiconductors, wafer fab and solar cells. The recent crisis may have affected the semiconductor industry but the demand for solar energy is seeing growth. Every item has a different cycle, and that gives Kelington consistent growth,” Ong said.

He said the company was looking to Asia for future growth and aimed to strengthen its presence in the region as many chip manufacturing companies were located in Asia.

Gan added that the company was currently operating in four markets — Malaysia, Singapore, China and Taiwan. He added that the different markets had been registering different growth rates since the global economic crisis.

“China is now stronger than Malaysia, and this gives us a platform (to grow),” he said.

Before setting up Kelington, Gan worked as an engineer at a blue-chip company in Singapore which was involved in wafer fabrication. After gaining much exposure, Gan decided to return to Malaysia to start up his own company.

Kelington group was established in 2000 with just RM10,000 in initial investment outlay and by 2002, the company had ventured outside Malaysia, to China. By 2004, Kelington had made its presence felt in China and Taiwan.