Business

Semiconductor rebound fuelled by export recovery

Economists uncertain if electronics manufacturing pickup can be sustained

Singapore's semiconductor manufacturing sector has been enjoying a rebound, thanks to a broad export recovery and improved global trade since the fourth quarter of last year.

The information technology industry has generated gains of 33.3 per cent on the Straits Times Index, making it the best performer, with semiconductor-related stocks leading the charge, according to SGX My Gateway.

Electronics maker Venture Corp, the largest stock of the IT sector, posted a whopping 36 per cent jump in net profit for the first quarter, well above expectations. The stock leapt from $9.72 on Jan 17 to a 10-year high of $13.06 on May 3.

Venture Corp said that while its traditional medical tech, healthcare and life science-related business goes back many years, it had more than doubled in terms of customer-base and product diversity in recent years.

Among the 10 largest IT stocks, Elec & Eltek International has been the best performer this year, with total returns of 69.8 per cent.

On April 9, the board said the group is expected to record a 170 per cent or more surge in first-quarter net profit.

Venture and Elec & Eltek offer above average dividend yields of more than 4 per cent.

"The move to advanced technology like the Internet of Things (IoT), also referred to as smart devices that are connected to the cloud or the Internet, has generated rising demand for semiconductors," said Mr Jarick Seet, RHB Research's head of small-mid caps.

"Cars today have electronics parts like GPS screens and parking sensors.

"There is growing demand globally, particularly from China, for automotive, consumer electronics and industrial goods, as reflected in the recovery in Nodx (non-oil domestic exports) and global trade.

"This is the first significant recovery since 2012, and should continue in the second quarter," he added.

Singapore's latest trade figures showed that Nodx for March rose 16.5 per cent year on year, following a 21.1 per cent expansion in February. DBS senior economist Irvin Seah said Nodx has been on its strongest growth streak since late-2010 to 2011.

"Plainly, what this underscores is that the external environment is improving and demand is certainly picking up, after the extended doldrums over the past years," he added.

Economists have said it remains to be seen whether this pickup in electronics manufacturing can be sustained in the coming months.

UMS Holdings, AEM Holdings and Sunright are among 11 other stocks representing the semiconductor industry within Singapore's IT sector. While the 11 stocks have a relatively small average market capitalisation of $74 million, they have all gained this year, with average returns of 67.8 per cent, the SGX My-Gateway report said.

AEM shares surged from 57.3 cents on Dec 30, 2016, to a high of $2.65 on April 27.

This came after it posted above forecast first-quarter results, "driven by a 276 per cent year on year increase in revenue in its equipment systems business", said CIMB, which had an add call on the counter.

Printed circuit board-related businesses such as Jadason Enterprises are also benefitting from the uptrend in the semiconductor space, said RHB.

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