SECTOR FOCUS OF THE DAY
Technology Sector : loT taking shape, but valuations dampen excitement Neutral
We have 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 radio frequency (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.
In 2018, companies in the limelight are Inari Amertron (HOLD, FV: RM3.00), Malaysian Pacific Industries (HOLD, FV: RM13.11), Unisem (HOLD, FV: RM3.32) and Globetronics (UNRATED) given sensors and RF are imperatives in a connected world, while prospects of ViTrox Corporation (UNRATED) and Pentamaster Corporation (UNRATED) are also exciting amid the rising adoption of automation.
Valuations dampen the excitement. From our projections, Inari Amertron (Inari), Malaysian Pacific Industries (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 17x/14x/14x, which are 1.5SD/1SD/4SD above historical average respectively and higher than the regional average of 13x.
STOCKS ON RADAR
Luxchem Corporation, Salutica, TMC Life Sciences, Malaysian Pacific Industries
ECONOMIC HIGHLIGHTS
Malaysia – Inflation fails to dampen ringgit’s mood
NEWS HIGHLIGHTS
Property Sector : Government ditches plans to raise stamp duty
TMC : Ceases Thomson Iskandar partnership
GBH : To buy factories and land for RM143mil
UEM Sunrise : To sell land for RM82mil
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The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.
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