Semiconductor sector
Downgrade to underweight: We downgrade the semiconductor sector from “neutral” to “underweight” due to the de-rating catalysts of no imminent recovery in demand, more interest in defensive sectors and a more challenging outlook. We lower our target price for Unisem (M) Bhd but raise our target price for JobStreet.com. Our top pick is JCY International Bhd.
Despite the deteriorating external environment, the 3Q11 results season saw improvement as there were two outperformers and only two underperformers this time around. This contrasted with the 2Q11 results season when there were three underachievers and no outperformer.
Once again, semiconductor stocks provided the main source of disappointment, with faltering demand the culprit this time around. Utilisation rates did not materially improve in 3Q11 and semiconductor players had difficulty filling up capacity. Unisem plunged into a core loss in 3Q11 from a small profit in 2Q11 as it was affected by slowing demand and poor utilisation rates. Malaysian Pacific Industries Bhd was also buffeted by the challenging external environment. It fell into a loss from a small gain the quarter before.
Non-semiconductor stocks were the star in 3Q11 as two of the three stocks beat expectations while Uchi Technologies Bhd met expectations. JCY surpassed expectations due to better gross margins from better operating efficiency and cost control. JobStreet’s results were also strong as volumes remained firm, offsetting margin erosion from investments in headcount and marketing. — CIMB Research, Dec 8
This article appeared in The Edge Financial Daily, December 9, 2011.
Downgrade to underweight: We downgrade the semiconductor sector from “neutral” to “underweight” due to the de-rating catalysts of no imminent recovery in demand, more interest in defensive sectors and a more challenging outlook. We lower our target price for Unisem (M) Bhd but raise our target price for JobStreet.com. Our top pick is JCY International Bhd.
Despite the deteriorating external environment, the 3Q11 results season saw improvement as there were two outperformers and only two underperformers this time around. This contrasted with the 2Q11 results season when there were three underachievers and no outperformer.
Once again, semiconductor stocks provided the main source of disappointment, with faltering demand the culprit this time around. Utilisation rates did not materially improve in 3Q11 and semiconductor players had difficulty filling up capacity. Unisem plunged into a core loss in 3Q11 from a small profit in 2Q11 as it was affected by slowing demand and poor utilisation rates. Malaysian Pacific Industries Bhd was also buffeted by the challenging external environment. It fell into a loss from a small gain the quarter before.
Non-semiconductor stocks were the star in 3Q11 as two of the three stocks beat expectations while Uchi Technologies Bhd met expectations. JCY surpassed expectations due to better gross margins from better operating efficiency and cost control. JobStreet’s results were also strong as volumes remained firm, offsetting margin erosion from investments in headcount and marketing. — CIMB Research, Dec 8
This article appeared in The Edge Financial Daily, December 9, 2011.
