AmInvest ‘Overweight’ call on tech sector

The proposal was supported by WSTS’ prediction that global sales for semiconductors will grow to RM2.5t in 2022, up 8.8% YoY 


AMINVESTMENT Bank Bhd (AmInvest) has an ‘Overweight’ call on the technology sector on the ground it is well supported by industry trends as the world embraces automation and various smart products. 

The recommendation was supported by the World Semiconductor Trade Statistics’ (WSTS) prediction that global sales for semiconductors will grow to US$601 billion (RM2.52 trillion) in 2022, up 8.8% year-on-year (YoY). 

In a report on the sector yesterday, the investment bank highlighted the growth momentum is driven by rollout of 5G technology, artificial intelligence (AI), autonomous electric vehicles (EVs) and Internet of Things (IoT) adoption. 

For 2022, the AmInvest noted smartphone replacement cycle among consumers will become prevalent as many opt to upgrade their iPhones to 5G-enabled next year. 

“This is in line with the IDC (International Data Corp) forecast, which sees 5G units making up over half of the smartphone shipments in 2022,” the report stated. 

Hybrid EVs and battery EVs segment are predicted to experience exponential growth beginning in 2022. 

“The trend is strongly supported by governments’ initiatives that set CO2 emission standards for automakers, led by the European Union,” AmInvest noted. 

The bank has a ‘Buy’ rating for both Malaysian Pacific Industries Bhd (MPI) and Inari Amertron Bhd. 

It opined that MPI and Inari will be able to ride on their growth momentum via strategic and synergistic acquisitions, further solidifying their position in the industry, supported by their huge cash balances. 

“MPI and Inari recorded a healthy net cash balance of RM0.91b and RM1.87b respectively, with the latter recently boosting its cash position via a private placement exercise which was completed in July 2021.” 

AmInvest is optimistic MPI will set out to benefit from the early investment in silicon carbide and gallium nitride power products TMRgraphic 

solutions, which involves the application in the fields of EVs, servers, renewable energy and consumer gadgets. 

Inari’s prospects, it added, will continue to remain positive due to its role as a proxy for 5G growth through its radio frequency (RF) business, which is predicted to gain from a rise in demand for 5G devices in FY22. 

The group’s positive prospects also arise from the resilience of its RF earnings due to higher chip complexity in 5G phones as well as its continuous efforts to enhance and diversify its revenue streams. 

Potential disruption includes the persistent supply chain disruptions, resurgence of new Covid-19 variants and weaker than expected sales due to cus- tomers cutting back on production and margin compression. 

AmInvest target price for MPI is RM59.50 per share pegged to a PE of 32x. The positive outlook is backed by MPI’s recent agreement to invest in a new piece of land and set up a plant in the Suzhou Industrial Park Suxiang Corp Zone with an estimated cost of RM14.81m. 

The new plant will provide assembly and test services for semiconductor and electronic components. 

MPI is set to continue to install more machines to support its expansion and is on the lookout for more anchor customers, securing more guaranteed business in the future, and investing in research and development and Industry 4.0, the AmInvest report noted.