‘Neutral’ Call Made On Technology Sector, Kenanga Expects Soft Demand To Continue Going Into 1HCY23

The World Semiconductor Trade Statistics tweaked its forecast for 2023 global semiconductor demand growth to a contraction of 4.1% in end-Nov 2022.

Based on the adjustment, Kenanga Research has maintained its “neutral” call on the technology sector as the research house expects softening of demand to continue into 1HCY23 which has also been stated by the Taiwan Semiconductor Manufacturing Company which is vary of a 15% q-o-q revenue decline in 1QCY23 owing to lower capacity utilisation as wafer inventory approaches new highs.

Kenanga, in a statement on Wednesday said the World Semiconductor Trade Statistics also tweaked its forecast for global semiconductor demand growth for 2023 to a contraction of 4.1% in end-Nov 2022 from a 4.6% expansion forecast three months before).

The research house said the local cybersecurity landscape in Malaysia continues to face challenges, such as data breach incidents at Telekom Malaysia Bhd and other major organisations such as AirAsia, iPay88, and Maybank.

“Emphasising on data protection, the government has allocated funds of up to RM73 million for cybersecurity in the previously tabled Budget 2023. With the ASEAN region still at the early stages of cybersecurity awareness, we believe LGMS Bhd (OP; TP: RM1.50) is well-positioned to ride on this structural growth, more so with its expansion plans into emerging economies such as Cambodia and Vietnam,” it said.

Kenanga said it also likes Kelington Group Bhd for it being a direct proxy to the front-end wafer fab expansion; its robust earnings visibility underpinned by both robust order book and tender book exceeding RM1 billion each; and its strong foothold in multiple markets, i.e. Malaysia, Singapore and China.

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