The semiconductor company said in notes accompanying its financial statements that profits were impacted by higher material costs arising from sales mix and higher commodity prices.(MPI chips- Filepic)
KUALA LUMPUR: AmInvestment Research has retained Inari Amertron
and Malaysian Pacific Industries (MPI) as its top picks for the technology sector.
It said on Thursday that Inari(Hold, fair value RM3) is a good proxy to the rapid adoption of LTE-A and the growing thirst for high-speed data should keep it busy until the next wave, i.e. the commercial introduction of 5th generation (5G) network.
“The company is well prepared to welcome the mega optical cycle, which calls for a large-scale network infrastructural upgrade to increase the penetration of high-speed internet and enlarge the storage of cloud data centres,” it said.
AmInvest Research, which has a Hold and FV of RM13.11 for MPI, described the company as a relatively diversified player given its exposure in various industries.
“Notably, we like the company's exposure in the communications, automotive and industrial segments which have higher projected growth,” it said.
The research house said MPI is well-positioned to ride the wave of surging number of connected devices, given that its MLPs are ideal in the area of radio frequency (RF) applications.
“MPI's larger exposure in the automotive segment relative to its peers offers bright prospects due to increasing functionalities and semiconductor content in vehicles,” it said.
To recap, the research house has a Neutral stance on the technology sector over the next 12 months. The key theme of the sector in 2018 should revolve around connected cars, smart homes and automation. This paints a positive outlook for sensor and RF chip manufacturers, automated equipment manufacturers and companies looking to improve operational efficiencies through automation.
“On the other hand, we believe the smartphone segment is on the verge of entering a single-digit growth trajectory as it moves towards saturation point in major markets.
“Overall, earnings prospects are looking positive for local semiconductor companies, but valuations are unattractive,” it said.
Apart from Inari and MPI, the research house has a hold for Unisem and FV of RM3.32) while it is has an unrated outlook for Globetronics given sensors and RF are imperatives in a connected world.
It pointed out prospects of ViTrox Corporation (unrated) and Pentamaster Corporation (unrated) are also exciting amid the rising adoption of automation.
“From our projections, Inari, MPI and Unisem are expected to register net earnings growth of 27%, 7% and 7% YoY in CY18F respectively.
“At current valuations, we believe positive prospects of the companies are already priced in. To put it in context, Inari/Unisem/MPI are trading at a CY18F PE of 17 times/14 times/14 times, which are 1.5SD/1SD/4SD above historical average respectively and higher than the regional average of 13 times,” it said.
Limited time offer:
Just RM5 per month.
