Phillip Capital Research said the EMS sector offered a higher degree of earnings certainty.
PETALING JAYA: Phillip Capital Research says industrial players in the electronics manufacturing services (EMS) and technology sectors are better positioned than consumer electronics players to ride on the artificial intelligence (AI) boom.
The research house said in a report that industrial players in the EMS and tech sectors are also less susceptible to any global economic slowdown.
“In the technology sector, the market has already priced in the impact of significant foreign exchange losses ahead of the results for the third quarter of 2024. However, sentiment is improving as the worst seems to be over and the US dollar strengthens.
“Investors are positioning for the next semiconductor cycle, with earnings delivery being the key catalyst for further share price re-ratings. The focus is expected to remain on the AI supply chain.
“We maintain an ‘overweight’ stance, favouring long-term secular trends in data centres, automotive and solar, with a preference for front-end exposures,” the research house said.
The research house said the EMS sector offered a higher degree of earnings certainty, with Nationgate Holdings Bhd
set to ramp up server production and fulfil delivery orders, driving 83% year-on-year (y-o-y) earnings per share growth in 2025.
Phillip Capital Research said the technology sector appeared to have bottomed out, signalling a gradual recovery in earnings.
“We foresee stronger earnings momentum in 2025, with sector earnings growth of 69.5% y-o-y as the semiconductor cycle turns,” the research house said.
For EMS sector exposure, the research house’s top pick is NationGate, as it continued to benefit from rising demand for AI servers.
“We raise our target price to RM3 from RM2.65 after factoring in higher server deliveries. We also continue to like Frontken Corp Bhd due to its unique exposure to the front-end semiconductor value chain.
“We also raise our earnings and target price for Pentamaster Corp Bhd from RM4.40, on an unchanged 31 times price-earnings multiple, taking into account the increased stake in Penta International from 63.9% to 71%.
