PETALING JAYA: AmInvestment Bank Bhd upgraded its stance on the technology sector to “overweight” from “neutral” given its positive outlook on the sector over the next six months.
In its report today, the research firm said that the industry’s earnings for the second half of the year (2H 2018) would be driven by sensors, radio frequency (RF) chips and operational efficiencies.
In 2H 2018, AmInvestment said the sector’s key theme should revolve around connected cars, smart homes and automation, which paints a positive outlook for sensor and RF chip manufacturers, automated equipment manufacturers and companies looking to improve operational efficiencies through automation.
“In the smartphone segment, while sales volume is plateauing in developed markets, sensor and RF content continues to increase. Overall, the earnings prospects are looking positive for local semiconductor companies,” it added.
Meanwhile, AmInvestment said among the key beneficiaries during the second half period are Inari Amertron, MPI, Unisem and Globetronics given sensors and RF are imperatives in a connected world.
The research firm also noted that Inari Amertron and MPI are among the beneficiaries of the government’s announcement in Budget 2018 to provide matching grants and capital allowances to support automation initiatives.
It said prospects of ViTrox Corp and Pentamaster Corp are also exciting amid the rising adoption of automation.
Additionally, AmInvestment said its “overweight” stance on the sector may be further strengthened if there is a change in the US dollar outlook for the better; the semiconductor companies under its coverage (Inari, MPI and Unisem) secure new jobs of significance; and/or share prices correct by 15% to 20%.
However, it noted that among the key risks include the lukewarm demand for end-products owing to weak economic conditions; monotonous content growth in underlying products in the absence of innovation; and margin erosion in the face of a weakening US dollar.
“If such risks materialise, we may downgrade our stance on the sector from ‘overweight’ to ‘neutral’,” it added.
Source: The Sun Daily