KUALA LUMPUR (June 27): Kenanga Research maintained its “overweight” rating on the technology sector in 3QCY22, based on resilient chip demand, as the Semiconductor Industry Association (SIA) reported a 23% year-on-year increase in sales of semiconductors for 1QCY22.
In a note published Monday, June 27, the research house said shipment figures for car sales and consumer end devices did not reflect the same optimism.
“We attribute this to the sporadic blockages in China, which lead to an accumulation of arrears.
“We remain selectively positive on the sector, favoring companies that have taken an undue hit but retain strong fundamentals to weather this environment of high inflation and rising interest rates,” he said.
Kenanga said that despite the weakening number of global smartphone shipments (1QCY22: -8.9% YoY), the US smartphone maker was the only brand to post slight growth of 2.2% YoY annual and should maintain its production unchanged for its next new model.
“As such, we appreciate Inari Amertron Bhd (OP; TP: RM3.30) for being in the US smartphone supply chain with a brand that can continue to grow its loyal user base.
“With the Chinese government easing containment measures, car sales in the EU and China showed encouraging figures (May 2022: +68% mom and +15.6% mom respectively), resuming the trend on recovery.
“This bodes well for Malaysian Pacific Industries Bhd (OP; TP: RM38.10) given its heavy automotive exposure and, more importantly, to have a head start in next-gen packages which are gradually being adopted in electric vehicles,” he said.
Kenanga said that by moving away from the intensive competition surrounding household cleaning products, PIE Industries Bhd (OP; TP: RM3.70) offers an exciting investment case given its exposure to unique customers with a stable order visibility.
“The new Chinese customer (relating to hardware ASIC) obtained through trade diversion is expected to contribute significantly to the group’s profits in FY22,” he said.