SINGAPORE (June 12): Maybank Kim Eng Research is maintaining its “neutral” rating on the Singapore technology sector, amid risks that arise from escalating trade tensions between US and China.
“The escalation of the US-China trade war has clouded the earnings outlook for the Singapore technology universe,” says analyst Lai Gene Lih in a report on June 10.
Venture Corporation is now Maybank’s preferred pick in the sector.
The brokerage is upgrading Venture Corp to “buy” from “hold” previously, and keeping its target price unchanged at $19.74.
This comes as Venture Corp’s share price has tumbled some 18% since the recent peak in April.
“We believe the US-China trade war should help Venture Corp win new customers, and its well-diversified base of more than 100 customers, many which are blue chip, could help smooth earnings risks,” says Lai.
“Following short-term earnings volatility, we expect growth resumption from both existing and new customers,” he adds.
See: Long-term growth for Venture intact despite trade woes: Maybank KimEng
Another technology stock that is receiving an upgraded call is Hi-P International, which has seen its share price fall by some 22% since April.
Maybank is upgrading Hi-P to “hold” from “sell” previously, with an unchanged target price of $1.22.
However, Lai cautions that Hi-P could see increased earnings risk amid an increasingly cloudy outlook.
He recommends that investors wait for Hi-P’s 2Q19 results, which will be announced in late July or early August, for better clarity.
See: Hi-P upgraded to 'hold' as Maybank KimEng awaits lower entry point and better earnings clarity
Meanwhile, Maybank is keeping its “buy” call on Valuetronics with an unchanged target price of 99 cents, after shares in the Hong Kong-based electronics manufacturing services provider fell close to 10% since late April on the back of trade war woes.
However, Lai believes Valuetronics’ expansion into Vietnam could help to insulate the group from the US-China trade war, and adds that it now offers “compelling valuations” with the risks already priced in.
See: Valuetronics kept at 'buy' on compelling valuations following trade tension fears
At the same time, the brokerage is also keeping its “buy call on “deeply undervalued” AEM Holdings, with an unchanged target price of $1.40.
“We find the shares deeply undervalued with 62% upside to our target price following the 25% price decline since the recent peak,” says Lai.
See: 'Deeply undervalued' AEM kept at 'buy' by Maybank despite macro woes
As at 3.51pm, shares in Venture are trading 0.3% higher at $16.16, shares in Hi-P are trading 1.5% lower at $1.33, shares in Valuetronics are trading flat at 64.5 cents, and shares in AEM are trading 1.5% lower at 97.5 cents.
