KUALA LUMPUR: AmResearch reaffirms itsoverweight stance on the sector despite the recent price retracement from quarterly highs.
It said on Wednesday, Aug 18 the recent sentiment selling was due to downgrade reports on US industry leaders which were namely AMD and Intel.
'Nevertheless, we hold firm to our conviction and believe that this sentiment is temporary, especially in light of recent announcements from SIA (Semiconductor Industry Association) and SEMI (Semiconductor Equipment Manufacturers Industry) ' the two most authoritative trackers on the sector,' it said.
According to SIA, the semiconductor industry increased sales by 7.1% in 2Q10 YoY, more than doubling the pace recorded at 2.8% in 1Q10. Meanwhile, SIA maintains positive outlook for the rest of the year.
SIA data showed booking growth for June is up 10.4% month-on-month (MoM), a double up from May's number of 5.7% MoM.
Book-to-bill ratio stood at 1.19x gaining pace from 1.13x in April and May. More importantly, the ratio increase came in from an increase in booking as well as delivery - which signals that demand appetite has not slowed down SEMI also reported wafer shipments in 2Q10 increased by 7% against 1Q10, a sign for higher output along the supply chain in 3Q10.
'We are also witnessing the longest period of above 1.0x book-to-bill ratio (11 consecutive months) post dot-com bust. This proves that despite strong delivery made over the past 6-months period, booking is still ahead of supply. We believe book-to-bill ratio should maintain above 1.0x until year-end. This is backed by booking growth being still above 5% MoM - well above capacity expansion growth.
'According to our industry sources, 3Q10 orders have already surpassed 2Q10, signaling 3Q10 results may well be above consensus estimates,' it said.
AmResearch said the sector continues to enjoy a sweet spot from combination demand growth maintained strength, which is set to continue well in 4Q10 though constraints along the supply chain will hamper speed of order delivery, which may well gain manufacturers some relative pricing power.
'We reaffirm BUY on MPI (FV=RM8.90, 1.7x price-to-book) and Unisem (FV=RM3.25, 1.9x price-to-book). Our valuation is still below peak boom time 2.3x price-to-book - observed in 2004-2005. Unisem stands to gain more from such constraints as its operation in China comes on stream as early as end of 3Q10,' it said.
It said on Wednesday, Aug 18 the recent sentiment selling was due to downgrade reports on US industry leaders which were namely AMD and Intel.
'Nevertheless, we hold firm to our conviction and believe that this sentiment is temporary, especially in light of recent announcements from SIA (Semiconductor Industry Association) and SEMI (Semiconductor Equipment Manufacturers Industry) ' the two most authoritative trackers on the sector,' it said.
According to SIA, the semiconductor industry increased sales by 7.1% in 2Q10 YoY, more than doubling the pace recorded at 2.8% in 1Q10. Meanwhile, SIA maintains positive outlook for the rest of the year.
SIA data showed booking growth for June is up 10.4% month-on-month (MoM), a double up from May's number of 5.7% MoM.
Book-to-bill ratio stood at 1.19x gaining pace from 1.13x in April and May. More importantly, the ratio increase came in from an increase in booking as well as delivery - which signals that demand appetite has not slowed down SEMI also reported wafer shipments in 2Q10 increased by 7% against 1Q10, a sign for higher output along the supply chain in 3Q10.
'We are also witnessing the longest period of above 1.0x book-to-bill ratio (11 consecutive months) post dot-com bust. This proves that despite strong delivery made over the past 6-months period, booking is still ahead of supply. We believe book-to-bill ratio should maintain above 1.0x until year-end. This is backed by booking growth being still above 5% MoM - well above capacity expansion growth.
'According to our industry sources, 3Q10 orders have already surpassed 2Q10, signaling 3Q10 results may well be above consensus estimates,' it said.
AmResearch said the sector continues to enjoy a sweet spot from combination demand growth maintained strength, which is set to continue well in 4Q10 though constraints along the supply chain will hamper speed of order delivery, which may well gain manufacturers some relative pricing power.
'We reaffirm BUY on MPI (FV=RM8.90, 1.7x price-to-book) and Unisem (FV=RM3.25, 1.9x price-to-book). Our valuation is still below peak boom time 2.3x price-to-book - observed in 2004-2005. Unisem stands to gain more from such constraints as its operation in China comes on stream as early as end of 3Q10,' it said.
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