Nationgate May Benefit From China+1 Strategy

Nationgate Holdings Berhad (NATGATE) & xFusion may benefit from the increased adoption AI, cloud computing  and machine learning.

Malacca Securities, in its Technical Focus release today (Dec 11), said the increased adoption of AI, cloud computing and machine learning will boost the need for new data centres and GPU servers.

Therefore, the  NATGATE’s Penang factory to house xFusion’s global supply centre will bode well  for the group.

NATGATE delivered better earnings in 3Q23 – Revenue grew 15.2% QoQ to  RM165.6m supported by the bottoming out of customer orders as customers that  was cautious with inventory levels in Q2 should be gradually increasing orders  coming into Q4. Meanwhile, net profit added 20.6% QoQ to RM17.3m. 

NATGATE may benefit from US-China geopolitical tension as MNCs may be  looking to relocate production to alternate countries, especially with the China +1  strategy. A key customer has relocated its base to Penang from China. This  customer currently outsources 30% of its contract manufacturing to NATGATE and  the closer proximity may entice stronger working relationship in the coming  quarters.

NATGATE & xFusion to benefit from the increased adoption AI, cloud computing  and machine learning – The increased adoption of AI, cloud computing and machine  learning will boost the need for new data centres and GPU servers. Therefore, the  NATGATE’s Penang factory to house xFusion’s global supply centre will bode well  for the group.

Share price has been consolidating sideways and could be due for a breakout above  RM1.37, we expect follow-through buying interest to be seen in the near term,  targeting the RM1.44-1.45, with a LT target at RM1.51. Support is set around  RM1.30-1.33, with a cut loss set around RM1.28. 

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