CEO Morning Brief

Tech Stocks Led by MPI Advance as S&P 500, Nasdaq Hit Record Highs

Publish date: Thu, 13 Jun 2024, 10:40 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (June 13): Technology-linked stocks on Bursa Malaysia climbed on Wednesday, riding on the overnight rally over at Wall Street, where the S&P 500 and Nasdaq closed at record highs.

Among the gainers were Malaysian Pacific Industries Bhd (KL:MPI), Inari Amertron Bhd (KL:INARI), KESM Industries Bhd (KL:KESM), Unisem (M) Bhd (KL:UNISEM) and Frontken Corp Bhd (KL:FRONTKN).

Stocks that hit multi-year highs include MPI, Vitrox Corp Bhd (KL:VITROX), Unisem and Frontken.

The Technology Index of Bursa Malaysia rose as much as 3.48% or 4.48 points to 81.3 points in early trades. At the market close, the index pared some gains to close at 79.22 points, still up 2.06% or 1.6 points.

The index, which tracks 48 stocks in the sector, have been on a tear year to date (YTD), climbing 24.97% or 15.83 points to 79.22 on Wednesday (June 12), from 63.39 on Dec 29, 2023.

The index outperformed the FBM KLCI, which recorded a YTD gain of 10.61% or 154.29 points to 1,608.95, from 1,454.66 during the same period.

MPI was the top gainer on Wednesday, rising RM1.38 or 3.58% to close the day at RM39.90 — its highest since January 2022 — valuing the company at RM8.37 billion.

Next up was Inari, which gained 32 sen or 9.2% to RM3.80, also its highest in over two years since January 2022, giving it a market capitalisation of RM14.31 billion.

Frontken gained 14 sen or 3.15% to RM4.58 for a market value of RM7.24 billion. Unisem rose nine sen or 2.16% to RM4.26, valuing it at RM6.87 billion. Both Frontken and Unisem's share prices were at their highest since 2021.

KESM also climbed 27 sen or 4.32% to RM6.52, translating into a market capitalisation of RM280.45 million.

Vitrox and Greatech Technology Bhd (KL:GREATEC), which rallied in early trades, closed the day lower after giving up their gains.

Vitrox rose RM1.05 or 21.65% to its record high of RM5.90, before retracing all gains to settle at RM4.50, down 35 sen or 7.22%, valuing the group at RM8.51 billion. Still, Vitrox's closing price remained its highest closing price since January 2022.

Greatech, meanwhile, gained 19 sen or 3.61% to an intraday high of RM5.46, but settled three sen or 0.57% lower at RM5.24, achieving a market value of RM6.57 billion.

On a YTD basis, MPI led the gains with a 41.49% increase, followed by Frontken with 41.36%, Unisem with 28.7%, Inari with 26.25%, Vitrox with 23.46%, and Greatech with 9.17% gain.

In a recent note, TA Securities Holdings Bhd maintained its "overweight" rating on the semiconductor sector, which it said is poised to improve further, following sales growth in April.

The research house has a "buy" call only on Inari, with a target price (TP) of RM4.30, according to its note on Monday.

TA Securities, on the other hand, maintained its "hold" rating on Unisem with a TP of RM4.37. Its TP for MPI stood at RM41.10, and 58 sen for Elsoft Research Bhd (KL:ELSOFT).

Market experts bullish on local tech stocks amid AI, cloud computing advances

Following the strong rallies in the local tech stocks on Wednesday (June 12), market experts believe the positive sentiment will continue amid a recovery in global demand fueled by artificial intelligence (AI) development.

Areca Capital Sdn Bhd chief executive officer Danny Wong Teck Meng said “the tech theme is here to stay over long term”.

“The dynamic development from 4G to 5G, to cloud computing and now AI, keeps demand in the tech sector everlasting,” Wong told The Edge.

“Domestically, the data-centre play may also provide some earnings upside to related stocks,” he added.

Similarly, TA Securities tech analyst Tony Chan Mun Chun, who is "overweight" on the semiconductor sector, said the tech sector is in its upcycle now and expects sentiment to continue to improve.

“We expect the sentiment of the semiconductor sector in Malaysia to improve further, backed by an anticipated healthy recovery in global demand and increasing trade diversion opportunities as a result of the China Plus One strategy,” he said.

According to Bloomberg, the price-earnings ratio (PER) of the technology index stood at 48.26 times currently, down from 49.13 times in 2023, and the 49.33 times recorded in 2020.

The technology index's PER stood at 45.85 times in 2021, before falling to 24.48 times in 2022.

Wong said forward PER for certain stocks appears reasonable, particularly for those with potential earnings growth.

TA Securities’s Tan anticipate that PER for tech stocks will come down due to earnings recovery, which is also in line with global semiconductor sales.

He cited the World Semiconductor Trade Statistics, which recently revised upwards its 2024 forecast for global semiconductor sales to US$611 billion (RM2.88 trillion) from US$588.4 billion previously, which the organisation anticipates will be fuelled by robust double-digit growth from logic and memory chips. Logic chips are used for the processing of data to complete a task, while memory chips are information storage devices.

Compared to the US$526.8 billion sales recorded in 2023, the revised figure represented an upward projection of 16%.

For individual stocks, MPI's current PER is 88.59 times, compared with its forward PER of 51.82 times, Inari's PER is 45.56 times, while its forward PER is 42.22 times.

Vitrox's forward PER is estimated at 50.56 times, down from its current PER of 75.63 times, while Unisem's forward PER is also projected to lower to 47.33 times, from 85.35 times now.

Source: TheEdge - 13 Jun 2024

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