In a statement, the investment bank said that WSTS recently raised its projection for global semiconductor sales growth in the calendar year 2024 to 16% from 13.1%, driven by strong demand for memory and logic integrated circuits (ICs).
“Following six consecutive months of year-on-year (y-o-y) growth in semiconductor sales from November 2023 to April 2024, Malaysian players, mostly at the back end, are beginning to feel the positive impact.
“They guided for improving order visibility in coming quarters, which is consistent with our view of a recovery in the second half (H2 2024),” Kenanga IB said.
Kenanga IB added that geographically, WSTS has also upgraded its sales forecasts for the Americas to increase by 25% from 22%, while Asia-Pacific’s are raised to 18% from 12%.
It noted that these two regions are expected to lead the recovery in 2024, accounting for approximately 27% and 56% of total global sales respectively.
Global semiconductor sales growth bottomed out and rebounded in November to 5.3% and December at 11.6% during 2023.
Since then, it has stayed on a recovery trajectory into the first quarter of 2024, with a year-on-year growth rate of 15.2%, remaining consistent in the mid-teens from January to March 2024.
“We believe the seasonally weak Q1 2024 is behind the sector with its earnings momentum poised to pick up strongly in H2 2024.
“We sense optimism among Malaysian players which are mostly at the back-end from their tone during their recent post-Q1 2024 result briefings, as the recovery in the semiconductor sector that started early this year trickles down the value chain,” it noted.
Kenanga IB said its top picks from the technology sector include Inari Amertron Bhd, Kelington Group Bhd (KGB) and LGMS Bhd.
In the outsourced semiconductor assembly and test space, Kenanga IB continued to favour Inari as a laggard player.
Over the immediate term, Kenanga IB said it will be buoyed by the upcoming new US smartphone launch featuring artificial intelligence (AI) functionality.
“We raise our target price (TP) by 15% to RM4.60 (from RM4.00) as we roll forward our valuation base year to the calendar year of 2025 from the financial year 2025 (FY2025).
“Additionally, we upgrade our forward multiple to 35 times (from 30 times), representing a 10% premium to the updated peer valuations,” it said.
Besides, Kenanga IB chose KGB as its top pick as the company is a direct proxy to the front-end wafer fabrication expansion and has a strong foothold in multiple markets namely in Malaysia, Singapore and China.
“Furthermore, LGMS’s strong growth prospects in its core cybersecurity business in the under-penetrated local and regional cybersecurity markets have positioned the company as Kenanga IB’s top pick,” it said.
Kenanga IB also said there is a higher demand for cybersecurity services from corporations locally on the heels of the enactment of Cybersecurity Bill 2024.