Following JCY’s announcement on 14 January, it is noted that JCY’s major customer will stop purchasing JCY’s component products which will have negative impact to its financials and possibly result in impairment. But at the same time, JCY has commenced realignment in its customer base by injecting new capital and resources in order to welcome new customer and are ramping up production for certain new range of products.
There are 2 interpretations/doubts in our opinion.
(1) Was the termination of orders from existing major customer due to cancellation/reduction in orders by the customer? Or JCY made the first move and willingly terminated this customer due to its bad track record?
In our view, the answer is unlikely the former because there is no signage that the HDD demand is shrinking in the near term.
(2) On the other hand, it is more likely that JCY made the move to terminate its customer after securing new customer in order to recoup their losses throughout the past few years.
If that is the case, JCY would be undergoing a major transformation in terms of their HDD supply chain. From the removal of customers with bad track record, JCY might be heading towards a bright future with existing and future 'healthy' customers.
Besides, JCY also mentioned that they are preparing for the new entry of customer by ramping up their production. This might indicate JCY is in the process of securing new orders from new customers and therefore has the courage to terminate this big customer with bad track record. Therefore, in the near future, JCY might be the black horse in this tech space.
💥[KOBAY, PIE, MMSV & VIS]💥
Recently, the boom market is back. And if you take a look at the recent spike in those stocks, there is a similarity in those stocks like Kobay, Pie, MMSV and VIS. Why stocks like JHM, OCK ATAIMS hard to get a push although those 2 categories are in the theme of EV, 5G and EMS?
The reason might be due to the variation in the number of shares that are liquid in the market between the 2 categories. The recently-spike stocks has a total number of shares of less than 500mil respectively but stocks like JHM OCK and ATAIMS has a huge number of shares and therefore it is not easy to push up the share price. Stocks like VIS and Kobay which has only less than 200mil shares can be fire up easily because there is not much liquidity in this stock.
💥[SEMICONDUCTOR INDUSTRY]💥
Another theme no doubt is the semiconductor theme where the Electric vehicles sector boom and 5G incoming NFCP project to be awarded by MCMC that have spur some sparks in these sectors. Another catalyst that we have seen is the record high results achieved by TSMC.
TSMC has achieved an outstanding result with the return on equity of 30%. Management also predicted that the operating profit margin is to be maintained in 1Q 2021 and range between 39.5% - 41.5%.
Automotive sectors and DCE sectors (Digital consumer electronics) has also seen an increase in revenue by 27% and 29% QoQ which signals the strong recovery and sector boom in EV vehicles and electronics products.
Moving forward, TSMC expects richer semiconductor content requirement driven by EV, ADAS (Advanced Driver Assistance System) and Infotainment systems to fuel the demand for processors, sensors, analog and power ICs. TSMC offers various automotive process technologies to help customers win the automotive market.
This astonishing result by TSMC continue to provide confidence in the stock market which resulted in the resilient in technology index in Bursa Malaysia as compared to broad KLCI index.
In terms of the potential for growth, Mi Technovation which specialized in ATE machines has yet to see its share price breakout to new high while others like Frontkn, UWC, MPI and Unisem has recorded an all-time high market capitalization.
Inari also stands a good chance to be the best candidate as a 5G beneficiary. Revenue Group which is undergoing expansion mode to create a cashless ecosystem is also relatively cheap.
Automation specialized such as Greatech and Pentamaster continued to be the favourite to trend investors with their competitive advantages in automation sectors. Despite Greatech’s rich valuation, the recent secure of new customers in EV space and catalyst of bonus issue continue to boost up the share price and the positive market sentiment in Greatech.
Technology stocks will continue to be one of the sectors that will outrun KLCI Composite index in 2021 due to the supply shortage in chips and the incoming demand from electric car factories.
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ReplyDeleteThank you for sharing such a good informative post. accredited investors