KUALA LUMPUR (Feb 21): The Malaysian semiconductor market has benefited from the roll-out of 5G infrastructure and is expected to continue to see robust growth in the coming years, according to Kenanga Research.
The research firm has identified Inari Amertron Bhd as one of the key beneficiaries of 5G adoption in end devices, with an "outperform" recommendation and a target price (TP) of RM4.60.
It has also identified Malaysian Pacific Industries Bhd (MPI), with an "outperform" rating and a TP of RM56.20, as a prime proxy for the growing trend of electric vehicles and autonomous driving.
“Besides, the arrival of 5G has brought forward the possibility of autonomous driving. Each car’s sensor (for detecting proximity, lane departure, traffic signs, etc) has to communicate the data to nearby vehicles and pedestrians to avoid a collision.
“While 4G is adequate for browsing the Internet and streaming videos, it still lacks the real-time speed that comes with 5G. With ultra-low latency of 1ms and lower with 5G, autonomous cars will be able to recognise danger and engage necessary action, such as braking in real time. This opens up opportunities for new services, such as advanced driver assistance systems and telematics for monitoring vehicles and traffic.
“We understand that MPI has been experiencing great demand for its chip packaging services for automotive sensors, thanks to the inevitable trend of electrification and autonomous driving in the global automotive sector,” said Kenanga in a research report on Monday (Feb 21).
At the time of writing, Inari shares had slipped 0.94% or three sen to RM3.17, with a market value of RM11.71 billion. The stock has declined 21.73% year-to-date.
MPI, meanwhile, was 0.17% or six sen higher at RM36.02, translating into a market capitalisation of RM7.56 billion. The stock has tumbled 27.23% since the start of this year.
On another note, the research firm said mobile network operators (MNOs) including Digi.Com Bhd, Maxis Bhd and Axiata Group Bhd’s Celcom are still in the midst of discussions with the government regarding the 5G roll-out.
It has a "market perform" recommendation for Digi and Maxis, with TPs of RM3.80 and RM4 respectively, and an "outperform" call and a TP of RM4.30 for Axiata.
“Once enterprises start adopting 5G services, the MNOs stand to benefit from new revenue streams from providing 5G connectivity and actual use cases, of which the MNOs are currently investing in to develop.
“That said, due to uncertainties around Malaysia’s 5G network roll-out, potential downside risks to the MNOs’ earnings from the wholesale model and potential delays for enterprises to adopt 5G services, we aren’t excited about the MNOs’ near-term prospects,” Kenanga explained.
Digi shares went down 1.92% or eight sen to RM4.09, with a market value of RM31.8 billion. Maxis declined 2.71% or 12 sen to RM4.30, giving it a market value of RM33.65 billion, while Axiata inched up 0.78% or three sen to RM3.90, with a market capitalisation of RM35.78 billion.