Mixed 1QCY22 results and 2QCY22 outlook for tech sector, says AmInvestment

Mixed 1QCY22 results and 2QCY22 outlook for tech sector, says AmInvestment
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KUALA LUMPUR (June 9): AmInvestment Bank Research has maintained its “overweight” rating on the technology sector and said the earnings results for the technology counters under its coverage were mixed for 1QCY22 with two within and three below expectations.

It said ViTrox Corporation Bhd and Inari Amertron Bhd’s earnings came in within expectations while Malaysian Pacific Industries Bhd (MPI), Globetronics Technology Bhd and Pentamaster Corp Bhd’s results were below expectations.

In a note on Thursday (June 9), the research house said it was upbeat on automated test equipment (ATE) makers' 2QCY22 outlook.

“Pentamaster’s order book commendably escalated 2.5 times y-o-y, reaching an all-time high of RM500 million as of May 2022, of which 40% of the order book was contributed by the automotive division.

“Meanwhile, we believe that ViTrox’s slower growth in China will be offset by other regions, particularly for the group’s automated board inspection (ABI) segment,” it said.

AmInvestment said softer 2QCY22 was expected for outsourced semiconductor assembly and test (OSAT) players.

“We expect MPI’s bottom-line growth to be flattish q-o-q as management guided persistently higher operational cost coming from increased [minimum] wage and energy cost.

“As for Inari, we think that its effort to diversify from smartphone components (64% of revenue as of 9MFY22) will only see fruitful results by 2HCY22,” it said.

The research house maintained its “overweight” call on the sector, favouring companies with a sales mix that tilts towards the automotive segment given the ongoing critical supply-demand imbalance for automotive chips.

“Our top buy continues to be MPI (fair value RM45.16), due to its focus to be the globally preferred OSAT partner for the automotive segment,” it said.