KUALA LUMPUR (Aug 17): The technology index saw several companies perform lower on Bursa Malaysia, amid reports that global smartphone shipments are poised to fall to their lowest in a decade, as economic uncertainties in China and elsewhere persist.

In a note late Wednesday (Aug 16), CGS-CIMB Securities maintained its “underweight” call on the semiconductor sector, saying that its current risk-reward is unappealing.

Companies in the sector, including Unisem (M) Bhd, Pentamaster Corp Bhd, Mi Technovation Bhd and ViTrox Corp Bhd, were among the top losers on Thursday.

Unisem shares closed 16 sen or 4.73% lower at RM3.22, from RM3.38 the day prior, with a market capitalisation of RM5.19 billion. Trading volume stood at 1.66 million, higher than 209,000 shares on Wednesday.

On July 27, Unisem reported that its net profit plunged 88.4% to RM23.93 million for the second quarter ended June 30, 2023 (2QFY2023), compared with RM205.86 million a year earlier, due to lower sales volume on softer market demand.

Its share price fell to RM3.07 the following day, after closing at RM3.20 on July 27. As of Tuesday, the counter had pared its losses at RM3.40.

Meanwhile, Pentamaster shares declined by six sen or 1.11% to RM5.35, from RM5.41 on Wednesday, valuing the company at RM3.81 billion. Trading volume was mild at 1.84 million shares, from 1.08 million shares the day prior.

The company reported better net profit, which rose 23.2% to RM23.65 million for 2QFY2023, from RM19.20 million a year ago, on the back of higher revenue and a better product mix.

Similarly, Mi Technovation also fell two sen or 1.26% to RM1.57, from RM1.59 a day earlier, with a market capitalisation of RM1.41 billion. It saw 969,100 shares change hands.

Its net profit rose 21.8% to RM22.73 million for 2QFY2023, from RM18.67 million a year earlier, mainly underpinned by favourable foreign currency exchange.

Bucking the trend, ViTrox closed seven sen or 0.89% higher at RM7.90, versus RM7.83 on Wednesday, giving it a market capitalisation of RM7.47 billion, with 606,849 shares traded.

The group saw its net profit drop 26.7% to RM37.66 million for 2QFY2023, from RM51.35 million for the corresponding quarter a year ago, as revenue shrank amid still languishing customer demand.

Less-than-appealing risk-reward

Overall, CGS-CIMB maintained its “underweight” rating of the semiconductor sector, adding that the sector’s current risk-reward is unappealing, due to limited room for upside earnings surprises, while valuations are demanding.

The research house said in its note that given the recent run-up in technology stocks, the market is of the view that the industry is on the verge of an inflection, with expectations of a strong recovery into the second half of 2023.

It noted that a meaningful industry recovery may happen only in 2024, as the current inventory glut could take some time to reverse.

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