RHB IB says tech-sector earnings might have bottomed, CTOS Digital, Inari and Datasonic prime picks

RHB IB says tech-sector earnings might have bottomed, CTOS Digital, Inari and Datasonic prime picks

KUALA LUMPUR (Sept 13): RHB Funding Financial institution Analysis (RHB IB) has maintained its “impartial” ranking of the know-how sector, and stated information of the iPhone ban in China and the dearth of novelty pleasure for the iPhone 15 might spell headwinds for gross sales volumes, particularly in China (probably exacerbated by patriotic sensibilities and Huawei’s comeback).

In a sector replace on Wednesday, the analysis home stated it stays cautious about the general chip sector, on a protracted slowdown and excessive valuations.

“We desire domestic-focused names, given the comparatively steady demand, and advocate a beta play to trace the worldwide chip sector run-up.

“Additionally, look out for thematic play of potential beneficiaries of Huawei’s provide chain,” it stated.

RHB IB stated the second-quarter outcomes for the sector have been principally in line, following some pre-emptive earnings estimate cuts earlier.

Nonetheless, it stated three out of 9 corporations missed expectations — Unisem (M) Bhd, JHM Consolidation Bhd, and Coraza Built-in Know-how Bhd — on account of slower demand and the lack of economies of scale, coupled with increased enter value.

RHB IB says tech-sector earnings might have bottomed, CTOS Digital, Inari and Datasonic prime picks

In the meantime, it stated Malaysian Pacific Industries Bhd got here in above expectations on higher margins, boosted by a robust US greenback.

The analysis home stated the market is now aggressively pricing in excessive development prospects for 2024 and potential new buyer wins, with Bursa Malaysia’s Know-how Index buying and selling at 25 instances price-earnings versus an estimated 27.1% development in 2024, after the current spherical of cuts in consensus earnings forecasts.

Nonetheless, it stated investor sentiment had improved on potential new alternatives and clientele, amid expectations that US tightening of financial coverage is near peaking.

“We observe the sector’s unappealing valuations, as a full-blown restoration stays a way off, and a few shares’ valuations are nonetheless effectively above pre-pandemic ranges.

“Strong steadiness sheets and the sturdy US greenback ought to assist present some stage of cushion,” it stated.

RHB IB stated it likes CTOS Digital Bhd for its domestic-focused enterprise, main place, and development prospects for its digital options and monetary know-how.

“Amongst smaller caps, we like Datasonic Group Bhd, as we count on sustained sturdy demand for its options in nationwide safety initiatives and potential new venture wins.

“For semiconductor publicity, we advocate a beta play in Inari Amertron Bhd as a proxy to the business, given its sturdy liquidity and comparatively massive market capitalisation.

“Sector upside/draw back dangers: i) stronger/softer shopper demand; ii) beneficial/unfavourable overseas alternate charges; iii) obsolescence of know-how; iv) new buyer wins/lack of shoppers; and v) enhancing/intensifying geopolitical tensions,” it stated.