CEO Morning Brief

Kenanga Keeps 'neutral' on Technology Sector, Expects Softening of Demand to Continue Into 1HCY2023

Publish date: Thu, 05 Jan 2023, 10:35 AM
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TheEdge CEO Morning Brief
Kenanga keeps 'neutral' on technology sector, expects softening of demand to continue into 1HCY2023

KUALA LUMPUR (Jan 4): Kenanga Research has maintained its “neutral” call on the technology sector as the research house expects softening of demand to continue into 1HCY2023 which has also been echoed by the likes of Taiwan Semiconductor Manufacturing Company which has warned of a 15% q-o-q revenue decline in 1QCY2023 owing to lower capacity utilisation as wafer inventory approaches new highs.

In a note on Wednesday (Jan 4), Kenanga 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-November 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: i) it being a direct proxy to the front-end wafer fab expansion; ii) its robust earnings visibility underpinned by both a robust order book and a tender book exceeding RM1 billion each; and iii) its strong foothold in multiple markets, i.e. Malaysia, Singapore and China.

Source: TheEdge - 5 Jan 2023

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