RHB Investment Bank Bhd (RHB Research) has maintained its OVERWEIGHT stance on the technology sector, highlighting Malaysian Pacific Industries, CTOS Digital, Coraza Integrated Technology and JHM Consolidation as top picks.
The research house upgraded Inari Amertron and Pentamaster Corp to BUY while downgrading SKP Resources to NEUTRAL, citing valuation, earnings momentum and growth prospects. The sector continues to be favoured for FY26F, particularly by Shariah funds, on the back of solid fundamentals, attractive forward valuations and strong earnings growth potential.
Sector core PATAMI rose 1.3% year-on-year and 28.1% quarter-on-quarter in 4Q25, with six companies delivering in-line results and five missing forecasts due to weaker sales, margin compression, unfavourable product mix, FX fluctuations and cost pressures.
Coraza was the sole outperformer, supported by margin expansion from economies of scale and robust revenue. Following the review, analysts trimmed FY26F sector earnings by 7.9%, reflecting substantial cuts to SKP and Unisem.
Analysts noted that sector revenue growth remained encouraging, with 3.1% year-on-year in 4Q25 and 8.4% year-to-date despite foreign exchange headwinds. Growth drivers include replacement cycles, automotive recovery, AI-related upgrades, stronger server and peripheral demand, and rising power management integrated circuit needs.
Management guidance remains constructive, with improving loadings into FY26F and programme wins from project transfers and supply chain reallocation expected to support further expansion.
Near-term risks include the ongoing US-Iran conflict, which is expected to have minimal direct impact on Malaysia given trade with Iran and the Middle East accounts for only 0.1% and 4.2% of total trade.
However, RHB Research highlighted that higher energy costs and a prolonged conflict could indirectly slow the semiconductor capital expenditure cycle and dampen electronics demand.
Other risks include elevated memory prices, technology obsolescence, loss of customers or projects and FX fluctuations, which could pressure earnings and margins.
