Kenanga Research has upgraded its recommendation on the technology sector to an “overweight’’ from “neutral’’ as it believes the sector is turning the corner.
PETALING JAYA: A firmer recovery is expected for the technology sector in the second half of this year (2H24) and this bodes well for the players.
Players themselves have guided for a stronger outlook ahead and this is consistent with Kenanga Research’s views. Its top picks for the sector include Kelington Group Bhd
(KGB), Inari Amertron Bhd and LGMS Bhd.
The research house has upgraded its recommendation on the technology sector to an “overweight’’ from “neutral’’ as it believes the sector is turning the corner.
Kenanga Research said it likes KGB for being a proxy to the front-end wafer fab expansion, strong earnings visibility underpinned by its robust RM1.3bil order book and strong foothold in multiple markets such as in Malaysia, Singapore and China.
Meanwhile, Inari is favoured for an impending ramp-up in orders for its radio frequency products, its ability to defend its top line and superior profit margins via its responsiveness to market demand as evidenced by its adoption of new technologies such as double-sided moulding and system-on-module and cost control.
LGMS is also a pick given the high growth prospects of its core cybersecurity business in the under-penetrated local and regional cybersecurity markets, specifically, higher demand for cybersecurity services from corporations locally on the heels of the enactment of the Cybersecurity Bill 2024.
LGMS is also a pick due to the deep moat around its business given the high barrier to entry created by the tough qualification process as a vendor, and its new proprietary Star Sentry product.
It has an “outperform’’ call on KGB, Inari and LGMS with target prices (TP) of RM4.10, RM4 and RM1.90 a share, respectively.
The research house also has an “outperform” call on Malaysian Pacific Industries Bhd (MPI) with a TP of RM46.84 a share.
It said MPI guided for higher utilisation at its Suzhou plant, which already turned profitable for a second consecutive quarter. This is attributed to an overall recovery in the China smartphone market, which recorded a 1.5% year-on-year sales growth in the first quarter of 2024, citing Counterpoint Research.
It said KGB anticipates more job wins in 2H24, driven by its wafer fabrication plant expansion in Singapore and China by key global semiconductor makers.
The group has also started tendering for jobs in new regions such as Hong Kong and Germany, at the request of existing customers, which is expected to positively contribute to its job replenishment target of at least RM1bil in financial year 2024.
