Friday, 14 July 2017

(The Star) UOB Kay Hian turns bullish on tech sector

PETALING JAYA: UOB Kay Hian is turning bullish on the Malaysian technology sector, with local electronics manufacturing services, manufacturers, logistics and financial technology companies observed as impending beneficiaries.

The research house has issued an “overweight” call on the sector following its inaugural New Economy Conference 2017, entitled “The Edge For Tomorrow”.

“Among the featured companies, we maintain our ‘buy’ call on ECS ICT Bhd with a target price of RM1.68, pegged to nine times its 2018 price-to-earnings ratio.

“ECS is a proxy to the rising ICT spending in Malaysia on the back of the country’s focus on a digital economy,” UOB Kay Hian said in a report yesterday.

The research house said ECS has strong distribution channels with 6,100 resellers (excluding cash payment clients) with a diversified portfolio of more than 40 brands.

“ECS’ thin margins (net 1.6% to 1.7%) is due to its business nature. It is better than the worldwide industry’s 1% net margin. Despite thin margins, ECS has consistently delivered low-teen returns on equity in the past few years.”

UOB Kay Hian said it also liked non-rated Salutica Bhd on its potential catalysts, namely, the pick-up in its bluetooth headset sales, capacity expansion for Neonode’s AirBar module solutions, and expansion of its sales channels of tyre pressure monitoring products through collaboration with car manufacturers.

“Sales of bluetooth headsets are set to pick up in its first quarter of 2018 due to clients’ introduction of two new models in the fourth quarter of 2017 and first quarter of 2018, as well as a refreshed model (of an existing one) which is nearing the end of its life cycle.”

The research house also said Pos Malaysia Bhd was set to benefit from the growth in global e-commerce, which is expected to reach US$1 trillion (RM4.3 trillion) by 2020.

“Domestic growth will have a compounded annual growth rate of 23% until 2021,” it said.