KUALA LUMPUR (Feb 3): The climb to fresh peaks continues among semiconductor-related stocks, which are also generally known as tech counters, on Bursa Malaysia.

A majority of these stocks have shot up more than 30% since the start of the new year. Malaysian Pacific Industries Bhd (MPI) leads the pack and it has gained 38.4% year to date. Others are UWC Bhd (32.9%), Greatech Technology Bhd (37.4%), Pentamaster (32%) and Unisem (35.9%).   

On Wednesday, five out of the top 10 gainers on the stock exchange today were tech stocks, namely MPI, UWC, ViTrox Corp Bhd, Greatech and KESM Industries Bhd.

In fact, seven of them hit record highs today. They are MPI, UWC, ViTrox, Greatech, Mi Technovation Bhd, Inari Amertron Bhd and Pentamaster Corp Bhd.

MPI, led the pack as the top gainer (in terms of value). It gained RM1.64 or 4.8% to a record high of RM35.94, valuing the counter at RM7.54 billion.

This was followed by UWC, up by 5.17% or 64 sen to close at a new high of RM13.02, valuing the counter at RM7.16 billion. Vitrox, on the other hand, grew by 62 sen or 3.69% at RM17.40, with a market capitalisation of RM8.21 billion.

Greatech had announced that its unit was teaming up with US-based company Atlis Motor Vehicles (Atlis) in developing an electric vehicle (EV) battery pack assembly production line in Arizona. It saw its share price climb 9.65% or 55 sen to RM6.25, bringing its market capitalisation to RM7.83 billion.

Meanwhile, KESM Industries Bhd was up 2.19% or 36 sen to RM16.78, with a market value of RM721.78 million.

Pentamaster rose 4.87% or 31 sen to a fresh high of RM6.67; Mi Technovation rose 4.42% or 22 sen to a fresh high of RM5.20; and Inari increased by seven sen or 2.04% to a new high of RM3.50.

In a research note dated Feb 3, TA Securities Research reiterated its "overweight" stance on the semiconductor sector by maintaining its "buy" call on Inari with a target price (TP) of RM3.95, followed by Unisem (M) Bhd (TP: RM9.42) and MPI (TP: RM40.65).

“Global semiconductor sales in December 2020 eased 2% month-on-month (m-o-m) [in line with the typical slowdown towards year end] but grew 8.3% year-on-year (y-o-y) to US$39.2 billion (RM158.7 billion). 4Q20 sales (for the fourth quarter of 2020) were the highest in over two years as it climbed further by 3.5% q-o-q and 8.3% y-o-y to US$117.5 billion.

“Overall, 2020’s numbers grew 6.5% to US$439 billion. This was ahead of the World Semiconductor Trade Statistics (WSTS) organisation’s forecast of growth of 5.1% to US$433.1 billion, highlighting the sector’s resilience against the macroeconomic headwinds induced by the Covid-19 pandemic,” said the research house's analyst Wilson Loo.

Loo said TA Securities continues to favour outsourced semiconductor assembly and test providers, including Inari, Unisem and MPI, for their robust earnings growth prospects.

He said this is because their earnings visibility looks strong with their pipeline backed by emerging trends including global 5G roll-outs, increasing digitalisation amid the Covid-19 pandemic as well as prospects of a global economic recovery.

According to him, the key downside risks include a prolonged Covid-19 pandemic weighing on economic growth and sentiment, a prolonged and heightened trade war, and weakening of the US dollar against the ringgit.

In line with the sector’s rerating, Loo took the opportunity to revise the valuation of Inari (previous TP: RM3.26); 33 times price-earnings [P/E]) upon pegging it at a higher P/E multiple of 40 times, which is +2.0 standard deviations to the stock’s five-year average.

“We opine that the higher PE multiple we ascribe relative to peers is justified by its above-industry average margin and ROE (return on equity),” he added.