Kenanga Investment Bank (Kenanga), in its latest technology sector update on June 28, 2024, maintained an OVERWEIGHT stance amidst a promising upcycle in the semiconductor industry.
Kenanga highlighted that the World Semiconductor Trade Statistics (WSTS) had revised upward its CY24 global semiconductor sales projection to +16% (from +13.1%), driven by robust demand for memory and logic ICs. This positive outlook follows consecutive months of year-on-year growth in semiconductor sales from November 2023 to April 2024, with Malaysian players, particularly in the back-end segment, starting to benefit.
The recovery in global semiconductor sales gained momentum, supported by strong growth forecasts for memory and logic ICs. WSTS upgraded its sales expectations for the Americas and Asia Pacific, underscoring these regions as pivotal in the sector’s rebound throughout CY24.
Malaysian semiconductor firms indicated improving order visibility for the upcoming quarters, aligning with Kenanga’s anticipation of a stronger recovery in the second half of CY24. The positive sentiment expressed by local players during their recent post-Q1CY24 result briefings reinforces expectations for sector-wide growth.
Kenanga identified INARI, KGB, and LGMS as top picks within the sector, citing INARI’s expanding presence in China’s smartphone and AI markets, KGB’s robust earnings visibility backed by substantial order books, and LGMS’s increased demand for cybersecurity services post the enactment of the Cybersecurity Bill 2024.
Kenanga’s analysis emphasised INARI’s strategic initiatives, such as the development of a new plant in China and its focus on AI-related products, positioning it favourably amidst the growing adoption of AI applications. Similarly, KGB’s outlook was positive, driven by its substantial order book and expansion prospects in multiple markets, including Malaysia and Singapore.
Furthermore, Kenanga highlighted LGMS’s pivotal role in Malaysia’s cybersecurity landscape, expecting increased demand for its services with the implementation of new cybersecurity regulations.
Kenanga reiterated its OVERWEIGHT recommendation for the technology sector, underscoring the favourable outlook driven by robust global semiconductor sales projections and strategic initiatives by key Malaysian players. Investors are encouraged to consider these factors when assessing investment opportunities in the technology sector.
