KUALA LUMPUR: EARNINGS in the technology sector are expected to keep rising year-on-year and half-on-half during the second half of 2024 (2H24), keeping the sector's interest strong.
RHB Investment Bank Bhd (RHB Research) noted that the market is anticipating strong growth of 97 per cent for the financial year 2024 (FY24), driven by sector recovery expectations from a low base.
"Many investors remain invested in the technology space despite several push-outs in the recovery.
"While we acknowledge that the jury is still out given the uncertainties in the pace of recovery and some earnings disappointment could be inevitable, the market is seemingly well guided with regards to a gradual recovery scenario and is willing to weather through the uncertainties," it said.
RHB Research indicated that although the recent US tariff increases may disrupt some supply chains, the firm views Malaysia as a net beneficiary of this escalation.
"We anticipate minimal to no impact on our local companies due to the existing targeted tariffs in place as of 2019, and the total value of affected goods is relatively modest.
"In fact, we view the intensified trade war between the two major economies as a net positive for the Malaysian semiconductor sector," it said.
The investment bank highlighted that this is reflected in the growth of foreign direct investments (FDIs) and the positive spillover effects for local companies resulting from supply chain shifts and relocations.
RHB Research recommended a "buy" rating for Malaysian Pacific Industries Bhd (MPI) and Pentamaster Corporation Bhd in the semiconductor sector to benefit from the industry's recovery, due to their diverse exposure to applications ranging from smartphones to automotive and various power management integrated circuits (PMIC) used in servers.
"Furthermore, the recovery in China's semiconductor space should help boost the utilization rate and turnaround of MPI's China plant.
"Meanwhile, Pentamaster should benefit from the reacceleration of capex spending and sustained strength in the medical technology space," it said.
The firm stated that both companies are positioned to benefit from US-China trade tensions, with their Malaysian plants serving as a neutral ground and China's self-sustaining policies.
For non-semiconductor investments, RHB Research favours CTOS Digital Bhd due to its domestic focus and growth potential, which aligns with the expansion of the digital economy and increasing demand for its digital solutions, analytical insights, and fintech exposure.