AMID diminishing appeal, AmResearch has maintain its “neutral” recommendation on the technology sector as it believes that multi-year growth riding on positive prospects has been fairly priced in.
Nevertheless, the research house said it may upgrade its recommendation to “overweight” if:
- Companies under its coverage secure significant jobs and/or major customers;
- Strengthening of the US dollar outlook;
- Faster-than-expected adoption of technological trends such as 5G, spurring high demand for end products; and
- Improvement in US-China trade relations which will help to reduce market uncertainty.
On the contrary, AmResearch may downgrade its stance to “underweight” if:
- Weak economic conditions and supply chain impacts caused by the delay in containing COVID-19 cases globally which leads to prolonged restrictions and higher costs;
- Margin erosion in the face of a weakening greenback;
- Worsening trade war ties between the US and China, specifically relating to technology and intellectual property; and
- Worsening local COVID-19 cases which disrupt production.
According to the research house, the sector’s positive prospects arise from increased demand for semiconductors relating to the following trends:
- Adoption of 5G smartphones and increased investment in expanding 5G infrastructure globally;
- Electric vehicles (EVs) and autonomous driving with more interest on new technologies using materials such as silicon carbide (SiC) and galium nitrite (GaN) as well as growth in smart sensors; and
- Adoption of Industry 4.0 technologies such as big data, automation and the internet of things (IoT) to build a more resilient supply chain.
“Our ‘neutral’ stance is based on the stocks under our coverage,” opined analyst Dalilah Fairoz in a sector update. “We have two ‘buy’ calls – one on Inari Amertron Bhd (fair value: RM3.31) and another is Globetronics Technology Bhd (fair value: RM2.84).”
Elsewhere, AmResearch has “hold” ratings on Malaysia Pacific Industries Bhd (fair value: RM36.05) and Pentamaster Corp Bhd (fair value: RM4.99), and one “sell” call on ViTrox Corp Bhd (RM13.24).
“The sector has an overall 3-star environmental, social and governance (ESG) rating as appraised by us in our ESG report on March 23,” added the research house. – June 22, 2021
