The overall technology sector is on rather shaky ground as the market digests news of cutbacks in capital expenditures and generally cloudy outlook articulated by several industry bellwethers.
Leading foundry player Taiwan Semiconductor Manufacturing Co has announced a 10% cut in capex for this year to US$36 billion ($51.2 billion) from US$40 billion planned earlier. Intel Corp, the leading semiconductor player, is reportedly planning to cut a few thousand jobs.
Nevertheless, there are still some insiders willing to buy into some of these tech stocks amid the wider drop. Ricky Lee, executive chairman of Grand Venture Technology, on Oct 14 acquired 40,000 shares on the open market at 50.5 cents each. This brings his stake to 52.09 million shares, equivalent to 15.35% of the company, up from 15.34% previously.
Lee last bought shares of his own company some four months ago. On June 15, he acquired 10,000 shares at 77 cents each. A day earlier, he had acquired 15,000 shares at the same price. Julian Ng, Grand Venture’s CEO, also acquired some shares around the same time. On June 15, he also acquired 10,000 shares at 76.5 cents each.
Grand Venture Technology provides manufacturing services for clients in various industries. In 1HFY2022 ended June, the company reported earnings of $7.1 million, down 16.5% y-o-y from $8.5 million previously. Revenue in the same period was $67.1 million, up 25.3% over 1HFY2021.
Lee says he is “pleased” to have achieved revenue and ebitda growth despite economic headwinds. “The profit contraction was in part due to significant investments in capability enhancement as part of our strategic positioning for future growth. These investments reflect our optimism about the future demand for our services from existing customers and those to be onboarded,” says Lee in the company’s earnings commentary.
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In his Oct 14 note, CGS-CIMB analyst William Tng says he expects Grand Venture will take a longer time to diversify its earnings base away from the semiconductor sector, which is slowing down. It was this sector that helped drive Grand Venture’s growth in 1HFY2022. Tng now rates the stock “reduce” and has cut his target price to 50 cents from 85 cents.
Grand Venture’s share has dropped by around two-thirds year to date.
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abrdn and EPF
Meanwhile, Scottish fund manager abrdn on Oct 13 acquired 616,700 shares of AEM Holdings on the open market at $3.24 each. In addition, AEM has been buying back shares. On Oct 18, the company paid between $3.1 and $3.13 for 112,600 shares. The following day, it paid $3.08 for 194,500 shares.
AEM is the provider of supporting services for its key client Intel. With the acquisition, abrdn now holds just over 19.06 million AEM shares, up from 18.48 million shares earlier, and equivalent to 6.168% of the company.
The day after abdrn’s acquisition, Malaysia’s Employees Provident Fund Board (EPF) acquired 457,100 shares at $3.21 each, bringing its total stake to just over $25 million, equivalent to 8.09%.
On the same day of EPF’s acquisition, AEM raised its revenue guidance for the current FY2022 ending December. It now guides for full-year sales to be between $820 million and $850 million. Its previous guidance was in the range of $750 million and $800 million.
Despite the higher sales guidance, analysts chose to remain cautious about this stock. Jarick Seet of Maybank Securities, in his Oct 17 note, downgraded the stock to “hold” from “buy”, along with a reduced target price of $2.98 from $6.06. “We reduced our pegged P/E multiple from 16x to 7.5x in this downcycle to factor in macro risks like rising interest rates, a potential sudden slowdown and continued de-rating of the tech space,” writes Seet.
In 1HFY2022 ended June, AEM reported earnings of $83.1 million, up 179.7% y-o-y from $29.7 million. Revenue in the same period was up 181.1% to $540.5 million.
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