Tech firms set to see more upside

Tech firms set to see more upside
By Chris Howells | Posted: 31 March 2011 0102 hrs

SINGAPORE: Singapore's big technology companies look poised to benefit from rising global consumer demand this year.

Local bank DBS said it expects 20 to 30 per cent upside in the share price of companies such as Venture, Amtek and Hi-P International.

These companies have not reported any supply glitch as well, since the disaster in Japan. They also have sufficient inventories till May.

Strong demand for smart phones and tablet computers, as well as high precision components, will be the main income drivers for this sector.

Singapore-listed Venture Corp, a tech manufacturing company, could face component shortages from the recent disaster in Japan, according to analysts.

But they said the company has significant inventory to fulfil current orders and this helps ensure a smooth production schedule for the firm.

Analysts said its strategy to diversify its product portfolio is likely to offset any shortages as well.

Meanwhile, strong demand for consumer electronics this year is expected to give a boost to the sector overall.

DBS Vickers Securities Equity Research vice-president Tan Ai Teng said: "Right now, demand is still holding up; companies are still benefiting from the sustained economic recovery globally so (there is) not much of an impact (in the) first quarter.

"The March quarter is usually the slower quarter of the year so, we still expect these companies to continue to see an uptick of demand going into the June quarters."

"In terms of my target prices, we are looking for upside ranging from almost 20 per cent for Venture, about 25 per cent for Hi-P and Amtek (at an) even higher percentage".

DBS has bought calls on Venture, Amtek and Hi-P International.

Hi-P is expected to benefit from increasing demand for smart phones and tablets, as it supplies components for these gadgets to major global players in the sector.

Meanwhile, Amtek has strong prospects on the back of solid demand for its high precision metal and plastic components.

Venture is set to benefit from high corporate and industrial exposure.

Small cap stocks like UMS Holdings have also reported no supply disruptions from Japan and could also see upside.

SIAS Research head of Research Roger Tan said: 'UMS is the least impacted; their supply comes mainly from the US and at this point in time, they are probably not seeing disruption in supply.

"In fact, it may be good for them because if prices were to go up because of the supply issues in the semiconductor equipment side, they are the main producers for now, for companies like Applied Materials".

Analysts said despite higher costs for components in the wake of supply disruptions, companies will likely pass these on to its customers and end consumers.

-CNA/wk

- wong chee tat :)