KUALA LUMPUR, July 3 (Bernama) -- Kenanga Investment Bank Bhd reiterates its Overweight rating on the technology sector following a strong projection on global semiconductor data sales and growth by the World Semiconductor Trade Statistics (WSTS).
The investment bank said in a note today that WSTS recently raised its projection for global semiconductor sales growth in calendar year 2024 to 16 per cent from 13.1 per cent, driven by strong demand for memory and logic integrated circuits (ICs).
“Following six consecutive months of year-on-year (y-o-y) growth in semiconductor sales from November 2023 to April 2024, Malaysian players - which are mostly at the back end - are beginning to feel the positive impact.
“They guided for improving order visibility in coming quarters, which is consistent with our view of a recovery in the second half (2H 2024),” Kenanga said.
Kenanga added that geographically, WSTS has also upgraded its sales forecasts for the Americas to increase by 25 per cent from 22 per cent, while Asia Pacific’s are raised to 18 per cent from 12 per cent.
Kenanga noted that these two regions will lead the recovery in 2024, accounting for approximately 27 per cent and 56 per cent of total global sales respectively.
Global semiconductor sales growth bottomed out and rebounded in November to 5.3 per cent and December at 11.6 per cent during 2023 and had since stayed on a recovery trajectory into the first quarter of 2024 with 15.2 per cent y-o-y, whereby the growth from January to March 2024 was consistent in the mid-teens.
“We believe the seasonally weak 1Q 2024 is behind the sector with its earnings momentum poised to pick up strongly in 2H 2024.
“We sense optimism among Malaysian players - which are mostly at the back-end - from their tone during their recent post-1Q 2024 result briefings as the recovery in the semiconductor sector that started early this year trickles down the value chain,” it noted.
Kenanga’s top picks from the technology sector are Inari Amertron Bhd, Kelington Group Bhd (KGB) and LGMS Bhd.
In the outsourced semiconductor assembly and test space, Kenanga continued to favour Inari as a laggard play. Over the immediate term, it will be buoyed by the upcoming new United States smartphone launch featuring artificial intelligence (AI) functionality.
“We raise our target price (TP) by 15 per cent to RM4.60 (from RM4.00) as we roll forward our valuation base year to calendar year of 2025 from financial year 2025 (FY2025) and upgrade our forward multiple to 35 times (from 30 times), which is at a 10 per cent premium to the updated peer valuations.
Besides, Kenanga chose KGB as its top picks as the company is a direct proxy to the front-end wafer fabrication expansion and has a strong foothold in multiple markets namely in Malaysia, Singapore and China.
Also, LGMS’ high growth prospects of its core cybersecurity business in the under-penetrated local and regional cybersecurity markets has made the company as Kenanga’s top pick as well as higher demand for cybersecurity services from corporations locally on the heels of the enactment of Cybersecurity Bill 2024, it said.
-- BERNAMA
