Thursday, December 16, 2010

CIMB Research maintains OW on tech sector

KUALA LUMPUR: CIMB Equities Research is maintaining its Overweight on the TECHNOLOGY [] sector, which despite the weak 3Q10 results, due to the potential re-rating catalysts.

It said on Thursday, Dec 16 the catalysts were a strong growth in the key end-user segment of handphones and the advent of the corporate replacement cycle, which is admittedly a more gradual one.

'Our top pick remains Unisem for its strong execution, tier-1 customer qualification and higher liquidity and beta,' it said.

CIMB Research said the earnings profile for the tech stocks is not expected to improve in the near term as they battle inventory correction, seasonality, slower demand growth and the strong though reversing RM and high raw material costs.

'But this should start to reverse itself in 2H11 as the industry returns to more typical seasonal patterns. Certain product segments are also still exhibiting fairly robust growth.

'Moreover, we think the long-term secular picture looks favourable given the growing use of electronic devices which require the input of chips and the continued trend of outsourcing. In addition, valuations for the semicon stocks are fairly attractive,' it said.

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