RHB Research maintains Underweight on semicon sector

KUALA LUMPUR (Jan 4): RHB Research Institute is maintaining its
Underweight call on the semiconductor sector as it has yet to see any
strong indications that the industry is poised for a stronger recovery.

It said on Wednesday the EU debt crisis has already taken its toll on
the chips demand in the region as reflected by a sharper decline of
11.5% on-year in November (versus October: 7.7%).

'Although
sales of smartphones with the latest wireless chips remained the bright
spot for the industry, this was not able to offset the weak demand from
the broader market.

'We believe that chip sales (especially from
the US and Europe regions) will be a better indicator as to whether a
sustainable recovery is in sight,' it said.

On the outlook for
MPI, it said although MPI was focusing on new segments such as the
automotive and mobile devices (i.e. X3-MLP and MEMS), it believes the
slowing consumer spending on the broader market such as PCs and consumer
electronics would have bigger knock-on effects on MPI's medium-term
earnings.

'This is mainly because revenue contributions from
these segments are the highest. Hence, we maintain our Underperform call
on the stock and a fair value estimate of RM2.10/share based on 0.6
times forward P/BV,' it said.

RHB Research also said Unisem was
not spared too despite qualifying for new customers. Unisem's earnings
visibility remains poor given weak order visibility and customers' lower
order rate despite commencing volume loading for newly acquired
customers.

'We believe medium-term chips demand would remain
uninspiring given weakness in end-market demand for consumer electronics
and corporate IT equipment. Therefore, we reiterate our Underperform
call and fair value estimate of RM0.92/share based on 0.6 times forward
P/BV,' it said.

As for Notion Vtec, the research house said
while it remains positive on Notion's camera segment on the back of
rising adoption of SLR cameras amongst consumers, it is wary of its
renewed focus on the HDD business.

'Recall that the company
incurred substantial cost increase following its capacity ramp-up of its
2.5'' HDD in FY09/10. Furthermore, we believe demand for HDDs could be
hampered in the longer term by demand for alternative storage mechanisms
i.e. cloud computing and hybrid storage. Thus, we maintain our
Underperform call on the stock with a fair value estimate of
RM1.21/share based on 6x FY09/12 EPS,' it said.