Tech companies report improving orders

PETALING JAYA: Listed technology companies are experiencing improved order flows and opportunities arising from the current geopolitical situation, analysts say.

This should lead to improved financial results for the second quarter of this year (2Q25) and a sustainable outlook going into the second half of the year (2H25).

Following site visits to Penang, RHB Research noted engineering support players were recording stronger order books and robust revenue growth.

This is a leading indicator for automated test equipment manufacturers and outsourced semiconductor assembly and test (Osat) companies.

Electronics manufacturing services (EMS) players are also reporting healthy visibility, underpinned by increased project transfers and customer enquiries.

“We expect stronger numbers in 2Q25 and 2H25, supported by sector recovery, despite lingering US tariff concerns.

“Most companies maintain an optimistic outlook, citing higher loadings from replacement cycles, new product introductions, demand recovery and technology advancements, complemented by fresh opportunities from the ‘Plus One’ strategy,” the research house stated in a report.

While tariff negotiations are still underway, RHB Research said Malaysia is well positioned to benefit from both short-term order diversion and long-term manufacturing relocation, supported by its developed ecosystem, skilled talent pool and infrastructure.

“While tariffs could induce demand volatility, the sector remains in an upcycle with no major disruptions anticipated.

“Notably, most semiconductor supply chains are exempted and Malaysia’s parts and components suppliers have minimal direct exports to the United States – estimated at below 15% for most,” it said.

RHB Research’s engagement with tech industry players in Penang found stronger orde rbooks and robust revenue growth trends seen from both the back-end and front-end automated test equipment (ATE) and semiconductor production equipment players, as a result of more outsourcing trends and opportunities due to the geopolitical situation.

ATE and Osat players indicated an uptick in purchase orders from China, India and Taiwan.

“ATEs are now pivoting to the new growth engines by moving up to the higher-value equipment segment in silicon photonics and complementary metal-oxide semiconductor and advanced packaging-related testers and handlers,” RHB Research said, adding that it found the outlook for Osat players had also improved as the smartphone and personal computer segments would see stable-to-improved loadings, stemming from the replacement cycle and advancements of technology, though lower requirement for testing time for certain chips may prevail.

It added EMS players were also benefiting from an increase in project transfers and relocation of orders into the region despite the tariff concerns, but warned the server business may see a slowdown due to a shift in platforms and models.

RHB Research maintained an “overweight” call on the technology sector as valuations are attractive, with the sector trading below 20-times forward price-earnings multiple. It believes there is a potential for re-rating as earnings momentum builds and global uncertainties ease.

“Revenue trends have strengthened since end-2024, even if near-term bottomline growth may be dampened by unrealised foreign exchange losses.

“We forecast sector earnings growth of 6% year-on-year (y-o-y) for this year and 39% y-o-y next year,” RHB Research said.

Its top sector picks with “buy” ratings are Malaysian Pacific Industries Bhd at a target price of RM29.70, Unisem (M) Bhd at RM2.93, Cloudpoint Technology Bhd at RM1.13, and Coraza Integrated Technology Bhd at 67sen.