AVI-TECH ELECTRONICS LIMITED (SGX:BKY)
FRENCKEN GROUP LIMITED (SGX:E28)
FU YU CORPORATION LTD (SGX:F13)
Technology Sector - Still Bullish On Semiconductors; Still OVERWEIGHT
- Maintain sector OVERWEIGHT, semiconductor industry recovery expected. Sustained capital equipment spending and the global memory rebound can be expected for 2H20, too. Inventories are stabilising, and dynamic random-access memory (DRAM) pricing is likely to rise.
- SEMI also expects equipment sales to grow 5.5% y-o-y to USD60.8bn in 2020, on advance logic and foundry spending and new projects in China.
- Chip sales have bottomed out, and should improve, but the industry is unlikely to see a V-shaped recovery, as moderated growth is more plausible.
Semiconductor demand has risen
- Semiconductor demand should mainly come from cloud and PCs, where demand has risen due to work-from-home measures taken against a backdrop of global lockdowns. Other segments like smartphones and Internet of Things (IoT) continue to enjoy strong demand globally.
- The drive towards 5G has also increased the demand for communications infrastructure. Other segments include artificial intelligence, the automotive sector, as well as the high-performance computing segments.
Avi-Tech Electronics (SGX:BKY) reported a strong 2Q20
- Avi-Tech Electronics reported a strong 2Q20, with PATMI surging 46.7% y-o-y to SGD1.4m. The semiconductor sector’s slowdown has likely bottomed out for the company, and its quarterly numbers should improve ahead. FY20 should be a much better year, with earnings having likely bottomed in FY19.
- Avi-Tech (SGX:BKY); Avi-Tech Share Price; Avi-Tech Target Price; Avi-Tech Analyst Reports; Avi-Tech Dividend History; Avi-Tech Announcements; Avi-Tech Latest News.
Frencken Group (SGX:E28)’s share price has exceeded our target price.
- Frencken Group's share price has exceeded our target price. We are now waiting for an update on their key customer, before reviewing our estimates and target price.
- Management remains bullish in Frencken Group's outlook, as the company stands to benefit from its key customer’s new product in the industrial automation segment for FY20F, despite expecting a drop for just 1Q20. We remain bullish on its semiconductor segment, which should grow looking forward.
- See Frencken Group Share Price; Frencken Group Target Price; Frencken Group Analyst Reports; Frencken Group Dividend History; Frencken Group Announcements; Frencken Group Latest News.
Fu Yu (SGX:F13) – stable and resilient.
- With more new projects in the medical and consumer and automotive fronts ahead, we expect Fu Yu (SGX:F13)’s positive growth momentum to continue from FY21F onwards. Despite a blip in FY20 caused by the COVID-19 pandemic, we expect Fu Yu to weather the storm, thanks to its robust net cash balance sheet. Also, it should still be able to reward its investors with attractive dividends, despite a temporary drop in profits this year.
- Fu Yu is also an attractive target for privatisation or acquisition.
- See Fu Yu Share Price; Fu Yu Target Price; Fu Yu Analyst Reports; Fu Yu Dividend History; Fu Yu Announcements; Fu Yu Latest News.
Top Picks are Avi-Tech, Frencken and Fu Yu.
- We like Avi-Tech Electronics and Frencken Group due to their exposure to the semiconductor sector, and expect their upcoming results to be positive – as these companies are positioned to benefit from the uptrend in semiconductor demand.
- See recent reports:
- Avi-Tech Electronics, Frencken Group and Fu Yu are also highlighted in RHB's Top Singapore Small Cap Companies - 20 Jewels 2020 Edition.
Jarick Seet
RHB Securities Research
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Lee Cai Ling
RHB Invest
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https://www.rhbinvest.com.sg/
2020-07-03
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