PETALING JAYA: Most companies in the semiconductor sector exceeded consensus earnings estimates for the second quarter which ended in June.
TA Research, however, continues to rate the sector “neutral” despite the outperformance.
“Inari Amertron Bhd, Malaysian Pacific Industries Bhd (MPI), and Unisem (M) Bhd’s reported improved earnings quarter-on-quarter (q-o-q), which also surprised on the upside generally, due to higher-than-expected revenue and/or better-than-expected profitability, ” TA Research said.
It did note that it had expected the contraction in Elsoft Research Bhd’s earnings from the previous quarter.
“Both MPI and Unisem recorded improved revenue q-o-q alongside the easing of containment measures and higher utilisation supported by order backlogs from previous months during the lockdown flowing through, ” it said.
Outsourced semiconductor assembly and semiconductor test companies including Inari, MPI, and Unisem are cautiously optimistic on near-term performance with emerging technologies such as 5G.
TA Research said that automated test equipment provider Elsoft would see near-term performance being challenged by Covid-19 headwinds.
However, it noted that Elsoft’s upcoming product line-ups, including a new series of automotive headlamp testers and smart devices like LED flash tester could see its prospects improving.
Meanwhile, for SKP Resources Bhd which is involved in the electronics manufacturing services (EMS) sector, TA Research said their second quarter results had met its expectations.
“We remain positive on its growth prospects with expectations for the group to achieve record revenue and earnings in the financial year 2021 (FY21), driven by higher production throughput on the back of resilience from its export markets, ” it said.
It noted that a key downside risk for semiconductor and EMS companies was an escalation in trade tensions and a prolonged pandemic.
This might weigh on the tech sector’s valuations, it said.
In a separate report, Ambank Research said on Sept 2 that it was raising MPI’s FY21–FY23 forecast earnings by 10%-13% due to its improved sales and better cost controls ahead.
MPI had also invested in automation to improve operational efficiencies, it said.
“We came away from MPI’s briefing feeling optimistic of its growth prospects, ” it said.
AmBank Research had maintained its “buy” call on MPI with a higher fair value of RM19.53 from RM17.33 per share previously.
MPI is pegged to an unchanged 2021 calendar year’s forecast price to earnings ratio (PER) of 21 times, which is a 30% discount to its local sector market cap weighted average PER due to tighter liquidity, it said.
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