Kenanga Research has initiated coverage on AMBEST with a target price of RM1.80, expecting the group to emerge as a key beneficiary of an accelerating global wafer fabrication equipment (WFE) investment cycle fuelled by surging artificial intelligence (AI) spending among major hyperscalers.
The research house said the semiconductor industry is entering a major WFE upcycle as the world’s four largest hyperscalers substantially increase capital expenditure to support AI infrastructure.
Combined hyperscaler capex is projected to surge 97% in 2026 to US$686 billion, followed by another 31% increase to US$898 billion in 2027.
Kenanga noted that hyperscaler capex and WFE spending have historically demonstrated a strong correlation of about 0.81, with every additional US$100 billion of AI-related capex associated with approximately US$8 billion of incremental WFE expenditure.
Based on its bottom-up analysis, WFE capital expenditure outside China is expected to jump around 46% in 2026, followed by growth of 41% in 2027 and 17% in 2028.
AMBEST is expected to gain directly from the expansion, with its WFE exposure projected to increase from approximately 47% of revenue in FY2024 to around 70% by FY2026.
Kenanga said the company is also positioned to benefit from the semiconductor industry’s transition towards increasingly sophisticated and higher-value wafer fabrication equipment.
Its capabilities in precision machining and value-added assembly services allow it to participate in more complex equipment programmes as semiconductor manufacturers move towards advanced production technologies.
Kenanga highlighted AMBEST’s established relationships with Tier-1 electronics manufacturing services players and semiconductor manufacturers, which provide the group with direct exposure to WFE demand.
These customers operate at the forefront of semiconductor manufacturing and require increasingly complex, high-precision components for wafer fabrication machinery.
The research house said AMBEST’s established track record has helped it broaden its customer base, while recent equipment purchases give the company additional capacity to meet stronger demand from both existing and new customers.
This could allow the group to capture a larger share of future WFE supply-chain spending.
Kenanga also expects AMBEST to benefit from a broader shift in semiconductor equipment supply chains towards Southeast Asia.
Combined revenue among the world’s four largest WFE companies is projected to increase 30% in 2027 and 18% in 2028, prompting global equipment manufacturers to expand production capacity and diversify supplier networks.
Malaysia is emerging as a key beneficiary of the trend, supported by its established semiconductor ecosystem, precision-engineering capabilities and growing role in global technology supply chains.
Kenanga said stringent supplier qualification requirements and lengthy approval processes within the WFE industry also create substantial barriers to entry, favouring established suppliers such as AMBEST.
Kenanga values AMBEST at RM1.80 per share, based on 25 times FY2027 forecast earnings, representing an estimated 28% discount to regional and Malaysian peers.
The discount reflects AMBEST’s relatively modest earnings base, although the research house said its confidence in the company’s earnings trajectory has strengthened.
Compared with its earlier non-rated assessment, Kenanga said growth is now expected to be supported by a broader-based ramp-up across several existing and new customers rather than relying predominantly on contributions from new customers coming off a low base.
Improved earnings visibility prompted Kenanga to raise its valuation multiple to 25 times price-to-earnings from 20 times previously.
The research house believes the higher valuation is justified by AMBEST’s structural growth prospects, increasing demand for higher-precision and higher-value engineering solutions, exposure to the WFE investment cycle and potential gains from global supply-chain diversification into Malaysia.
However, Kenanga highlighted several downside risks, including a slowdown in global WFE spending, the absence of long-term customer contracts that could result in revenue volatility, and slower-than-expected ramp-ups in new projects or customer onboarding.
