Excerpts from Maybank KE report

Analyst: Gene Lih Lai, CFA

Plenty to like post 1Q21
We remain Positive on the sector and prefer companies with WFE (wafer fab equipment) exposure as these are beneficiaries of current chip shortages.

Lai Gene LihGene Lih Lai, CFA, analystBarring material extension/ incremental restrictions of the tightened MCO in Malaysia, we see immaterial impact on companies in our coverage.

Positive read-across from Applied Materials infers demand sustainability for this semicon equipment spending cycle.

We also raise Frencken's TP to SGD2.00 on unchanged 14.5x FY21E P/E, as we factor in better than expected earnings momentum.


Frencken - Capturing strong momentum

We raise FY21-22E EPS by 15-19% to capture better than expected business momentum.


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Semicon is a beneficiary of wafer fab equipment (WFE) growth and new products.

Analytical and medical should enjoy post-Covid19 normalisation. We think there is upside potential in Industrial automation particularly if customer Seagate needs to expand capacity amid current HDD shortages.

We also see components shortages in auto/ analytical/ medical as a key risk.

Test graphic1.21

AEM - Underappreciated drivers

AEM bought back shares, and director James Toh raised his stake in May. 20 (see Fig. 3).


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While those amounts are not large, AEM's buyback/ insider purchase have historically signaled stronger future prospects.

We believe system level test's proposition in solving many test challenges arising from increasingly complex chips that enable inflections in 5G/Al/edge remain underappreciated.

As such we look forward to a realignment of cyclical and structural drivers from 2H21 and 2022.

UMS - Earnings drivers robust

According to Applied Materials (key customer), chipmakers are providing multi-year spending guidance for the first time in history.


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This infers demand sustainability in this cycle. Our checks suggest UMS' earnings trajectory remains robust from semiconductor spending tailwinds, and as such we conclude that the stake sale by chairman and CEO Mr. Andy Luong (from 20.4% to 16.4%) to be unrelated to UMS' fundamentals.

At 11.7x FY21E P/E, UMS is trading at the lower end of its upcycle range of 11-16x.

Full report here

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