Excerpts from Maybank KE report

Analyst: Gene Lih Lai, CFA

Drivers intact; Beneficiaries of advanced packaging

Chance to accumulate on dips
We remain POSITIVE on the Singapore Tech sector, and believe the recent retracement is an attractive opportunity to accumulate as our theses are unchanged.

We note over a longer horizon, share prices correlate highly to consensus EPS revisions, and have little correlation to 10Y UST yields.

As we see upside drivers to UMS and Frencken, we now value them at 15x/14.5x FY21E P/E respectively, as our previous ROE-g/COE-g method does not capture these.

Hence our UMS/Frencken TP are up 17%/25% to SGD1.57/1.74 respectively.

Sector favourites are UMS, Frencken, Venture and AEM.

maybank sgtech3.21 

Theses unchanged

Observations of our coverage universe and their customers support our theses.

We see UMS as the best candidate to ride out chip shortages, as it is a beneficiary of foundry spending.

Meanwhile, Venture’s and Frencken’s end-markets are improving, and they are expecting several customers to launch new products in FY21.

While we are concerned about HDMT TH (high density modular test test handlers) high-base effects for AEM in FY21E, we see upside drivers from:
i) accretive M&A; and
ii) stronger-than-expected cloud/ 5G spending in 2H21.

Higher TP for UMS and FRKN due to upside drivers

For UMS, we believe potential upside drivers include:

i) positive surprise of current business momentum in 2021 amid Applied Materials’ (AMAT) robust outlook;
ii) new business opportunities (e.g. Lam Research building supply chain in Penang/ UMS courting potential new customer).

For Frencken, we and consensus’ net margins are 7-8% for FY21-23E, but we believe Frencken has scope to outperform these from levers such as:

i) greater value-add with customers in coming years; and
ii) continual cost control.

AEM and UMS: beneficiaries of advanced packaging

Performance, power, area-cost and time to market demands from inflections like Big Data, IoT and AI are putting limits on traditional Moore’s law scaling.

As such, chipmakers expect to increasingly rely on advance packaging technologies to drive performance improvement.

Intel is a key advocate of this, and we see AEM as a beneficiary of current known-good-die issues surrounding heterogeneous packaging.

As deposition and etch technologies are also crucial in enabling advanced packaging, and this is a high growth area for AMAT, we believe UMS is a beneficiary of this trend too.


Key risks in our sector include: i) chip shortages/ slower-than-expected recoveries curtailing volumes; and ii) excessively weak USD.

Value3.21

Full report here. 


Share Prices

Counter NameLastChange
AEM Holdings3.980-0.070
Avarga0.305-
Avi-Tech Electronics0.405-
BH Global0.295-
China Sunsine0.495-
Food Empire0.850-
Fortress Minerals0.620-0.020
Golden Energy0.380-0.005
GSS Energy0.0670.001
InnoTek0.860-0.025
ISDN Holdings0.710-0.015
ISOTeam0.123-0.011
IX Biopharma0.230-
KSH Holdings0.365-0.005
Leader Env0.0780.004
Medtecs Intl0.800-0.010
Moya Asia0.0680.001
Nordic Group0.310-0.005
Oxley Holdings0.2250.005
Procurri0.330-
REX International0.205-
Riverstone1.240-0.040
Roxy-Pacific0.395-
Southern Alliance Mining1.0000.010
Sri Trang Agro1.560-
Straco Corp.0.520-0.010
Sunpower Group0.665-0.015
The Trendlines0.1030.001
UG Healthcare0.560-0.015
Uni-Asia Group0.950-0.015
Wilmar Intl4.410-0.050
Yangzijiang Shipbldg1.3900.010
Yinda Infocomm0.2350.005

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