Technology Sector - RHB Invest 2020-04-15: Disrupted By COVID-19 Pandemic; OVERWEIGHT

Technology Manufacturing Sector - RHB Invest | SGinvestors.io AVI-TECH ELECTRONICS LIMITED (SGX:BKY) FRENCKEN GROUP LIMITED (SGX:E28) FU YU CORPORATION LTD (SGX:F13) VALUETRONICS HOLDINGS LIMITED (SGX:BN2) VENTURE CORPORATION LIMITED (SGX:V03)

Technology Sector - Disrupted By COVID-19 Pandemic; OVERWEIGHT

  • MAINTAIN sector OVERWEIGHT, correction represents opportunity.
  • With countries going into lockdown and global supply chains disrupted, Singapore-listed manufacturing stocks have undergone a severe correction. However, some companies under our coverage have solid net cash balance sheets and attractive yields, while others (in the semiconductor sector) should see positive growth despite the ongoing COVID-19 pandemic.
  • Valuations are attractive, and our Top Picks are Avi-Tech (SGX:BKY), Fu Yu (SGX:F13), and Frencken Group (SGX:E28).



Still positive on semiconductors, Avi-Tech and Frencken are good proxies.

  • The semiconductor sector should still fare well, despite the pandemic wreaking havoc on a multitude of industries. With UMS Holdings (SGX:558) and AEM Holdings (SGX:AWX) both having rerated upwards by almost 30% in the last two weeks, we believe Avi-Tech (SGX:BKY) and Frencken Group (SGX:E28) are also good proxies that should ride on this trend.
  • Avi-Tech’s margins should continue to improve, due to strong growth from burn-in services which fetch much higher gross margins. It has also net cash of over SGD30m, while offering an attractive yield of 7.1% for FY20F.
  • Meanwhile, we expect to see growth in Frencken Group’s semiconductor business, but other segments should be negatively impacted. As such, we cut FY20-21F EPS by 10%, but maintain a BUY call, with a lower Target Price of SGD0.90.


Net cash companies will likely pull through better than peers.



The worst is over; Valuetronics upgraded to BUY.



Maintain BUY on Venture Corp, with a lower Target Price of SGD16.60.



Despite earnings cuts, valuations remain attractive.






Jarick Seet RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-04-15
SGX Stock Analyst Report BUY MAINTAIN BUY 0.500 SAME 0.500
BUY MAINTAIN BUY 0.90 DOWN 1.050
BUY MAINTAIN BUY 0.28 DOWN 0.320
BUY UPGRADE NEUTRAL 0.66 DOWN 0.760
BUY MAINTAIN BUY 16.60 DOWN 19.300



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