THE global semiconductor supply chain’s upcycle is still very much intact with selected technology-based counters likely to ride on the uptrend.
Upbeat about such development, Maybank IB Research named the two key catalysts as:
- Deployment of the 5G network with high adoption rates and stronger demand and supply for 5G devices (i.e. smartphone); and
- Growing sub-sectors such as automotive/electric vehicles (EV), Internet of Things (IoT), artificial intelligence (AI), medical/life science and Industry 4.0 (IR4.0).
“This should lead to strong earnings growth for selected Malaysian technology hardware companies in 2021-2022 and support the sector’s re-rating to richer valuations,” opined analyst Kevin Wong in a technology sector update.
“Elsewhere, valuations are also supported by healthy balance sheets with a net cash position/low gearing that is supportive of M&A (merger & acquisition) opportunities.”
On a positive note, the World Semiconductor Trade Statistics (WSTS) has projected global semiconductor sales to grow 8.4% year-on-year (yoy) (2020: +5.1%) while SEMI (the global industry association) has forecast global fab equipment spending to rise by 13% yoy in 2021 (2020: +8%).
Elsewhere, Osram has significantly raised its 2021 outlook with favourable top-line growth estimates, and Taiwan Semiconductor Manufacturing Co Ltd has guided for a sizeable capex of US$25 bil-28 bil in 2021 (2020: US$17.2 bil) to make advanced chips.
Within Maybank IB Research’s coverage, the sector is currently trading at CY2021/2022E price-to-earnings ratio (PER) of 39 timers/37 times.
All in all, Maybank IB Research reiterated its “positive” stance on the sector as it thinks that prospects for the sector will be sustained at this juncture.
“Year-to-date (2021), the broad Bursa Malaysia Technology Index has risen 27%, strongly outperforming the FBM KLCI Index with the latter declining -2%,” noted the research house.
Inari Amerton Bhd remains Maybank IB Research’s top “buy” premised on strong catalysts from its radio frequency (RF) division attributed to its key smartphone end-customer via Broadcom.
Its other “buy” picks are: (i) Globetronics Technology Bhd which is underpinned by volume recovery of selected products and contributions from new products, and (ii) Frontken Corp Bhd which has strong earnings prospects from its semiconductor segment and Taiwanese customers. – Feb 18, 2021
