AEM HOLDINGS LTD (SGX:AWX)
VENTURE CORPORATION LIMITED (SGX:V03)
HI-P INTERNATIONAL LIMITED (SGX:H17)
UMS HOLDINGS LIMITED (SGX:558)
VALUETRONICS HOLDINGS LIMITED (SGX:BN2)
Singapore Technology Stocks - Malaysia Marketing Feedback
AEM remains top pick on still robust outlook
- We marketed our views and updates of the impact of Covid-19 towards the Singapore Tech sector to more than 30 clients last week. Clients were primarily interested towards the prospects of Venture Corp (SGX:V03) and AEM Holdings (SGX:AWX).
- We continue to favour AEM Holdings for sector exposure, due to its strong FY20E earnings visibility.
- As risk-reward no longer appear attractive for Venture Corp (SGX:V03) and Hi-P International (SGX:H17), we downgrade both to SELL from Hold with unchanged earnings and Target Price. Key risk to our view on Venture Corp and Hi-P International are stronger than expected volumes in 2H20.
Interest primarily towards AEM and Venture Corp
- For AEM Holdings, clients were keen to understand the underlying dynamics of the strong FY20 revenue outlook, and to gain colour on growth initiatives, such as with Huawei and the Hybrid test handler for Intel, both to be commercialized this year.
- For Venture Corp, clients were interested to understand longer-term prospects, as well as shorter-term disruptions.
Semiconductor equipment coverage updates
- On 16-Apr, AEM Holdings reiterated its FY20E revenue guidance of SGD360-380m, and updated that it is operating “without any material adverse impact” as a result of anti-Covid-19 measures implemented by governments globally. See AEM Holdings Announcements.
- UMS Holdings (SGX:558) remains “cautiously optimistic” on the current outlook, and we continue to see UMS Holdings as a beneficiary of sustained logic/ foundry spending this year. See UMS Holdings Announcements. Despite acknowledging uncertainties due to Covid-19, TSMC (a key customer of Applied Materials, in turn UMS Holdings’s key customer) has affirmed its FY20 capex guidance of USD15-16b, as the spending caters to 2021 growth and beyond. TSMC remains confident of “multi-year megatrends” of 5G and high performance computing applications.
Downgrade Venture Corp and Hi-P to Sell on valuation grounds
- Venture Corp and Hi-P International have risen 14%/20% in the last month. As we no longer see favourable risk-reward relative to the more cautious outlook outlined in “Singapore Technology Sector - Maybank Kim Eng 2020-03-29: Bracing For A Storm”, we downgrade Venture Corp and Hi-P International to SELL with unchanged ROE-g/COE-g Target Price of SGD13.90 (based on 1.5x FY20E P/B) and SGD0.78 (based on 1x FY20E P/B) respectively.
- For Venture Corp, a key risk to our view is if corporate capex appetite remains resilient in 2H20, and that customers do not delay new product introductions. We remain constructive towards Venture Corp’s long-term prospects, but believe investors may have an opportunity to accumulate at more attractive valuations.
- For Hi-P International, a key risk is if 2H20 volumes are stronger than expected, perhaps due to robust sales of the key wireless customers’ smartphones, notwithstanding weakening consumer sentiment globally.
Impact of COVID-19 to Singapore Technology Stocks
- See attached PDF report for summary of direct/indirect impacts of COVID-19 to AEM Holdings (SGX:AWX), Hi-P International (SGX:H17), UMS Holdings (SGX:558), Valuetronics (SGX:BN2) and Venture Corp (SGX:V03).
Gene Lih Lai CFA
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2020-04-19
SGX Stock
Analyst Report
2.820
SAME
2.820
13.900
SAME
13.900
0.780
SAME
0.780
0.960
SAME
0.960
0.820
SAME
0.820
