KUALA LUMPUR (April 12): TA Securities has maintained its 'overweight' stance on the technology sector, and said the sentiment of the semiconductor sector in Malaysia will improve gradually, underpinned by an anticipated recovery in global demand and increasing trade diversion opportunities as a result of the 'China Plus One' strategy.

In a sector update on Friday, the research said that within its universe, it maintained 'buy' on Inari Amertron Bhd (with a target price or TP of RM3.55) and Elsoft Research Bhd (TP: 59 sen).

Elsoft mainly provides cost effective automated test equipment solutions to the semiconductor, optoelectronic and automation industries.

“For Malaysian Pacific Industries Bhd (MPI), we have cut our earnings forecasts by 3.4% for the financial year ending June 30, 2024 (FY2024), 18.7% for FY2025, and 23.9% for FY2026, after taking into account the potential slowdown in sales of electric passenger vehicles in China.

“After revising the earnings forecasts and rolling forward our valuation base year to calendar year 2025 (CY2025), we revised our TP from RM32.35 to RM36.20, based on a price-earnings (P/E) multiple of 28 times CY2025 earnings per share. We maintain our 'buy' call on MPI,” the research house said.

Meanwhile, TA Securities took the opportunity to increase the target P/E multiple for Unisem (M) Bhd from 26 times to 28 times, following a brighter outlook for the semiconductor space.

“Consequently, we tweaked the TP higher from RM3.56 to RM3.84, based on 28 times CY2025 earnings. We maintain our 'hold' call on the stock.

“Key downside risks include: i) heightened geopolitical tensions weighing on economic growth and disrupting supply chains; ii) weaker-than-expected sales; and iii) weakening of the US dollar against the ringgit,” the research house said.