The Business Times

Maybank downgrades outlook on Singapore tech sector to ‘neutral’; Venture still top pick

Ry-Anne Lim
Published Wed, Nov 2, 2022 · 04:12 PM

MAYBANK Securities has downgraded its call on Singapore’s technology sector to “neutral” from “positive” in the face of economic headwinds and an “uncertain” outlook for FY2023. 

In a research report on Wednesday (Nov 2), analyst Jarick Seet noted that semiconductor-related stocks, such as AEM : AWX 0% and UMS : 558 0%, are expected to post “strong” earnings in Q3 2022, but this might not hold in the longer term. 

Instead, he believes that share price performance will be determined mainly by global market sentiment on macroeconomic events, corporate capital expenditure (capex) targets, and orders by the major chip players around the world in the following months. 

“Further upside may only be possible if there’s more certainty about the outlook due to fears of a sudden slowdown or cut in orders,” he said. “Global chipmaker outlooks and their capex plans will also be key indicators for Singapore tech stocks.” 

In addition, Seet highlighted that most tech companies are expanding due to “robust outlook” of key clients. But should these expansions delay or plans change, it could result in a “downside surprise”, he said. 

“Margin contraction could also signal tougher times ahead for these players,” he added. 


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In the instance of tech solutions provider Aztech Global : 8AZ 0%, Maybank predicts that orders from its key customers will remain strong for the rest of 2022 – reaching its projected book order of S$450 million in the second half of the year – but these orders might be delayed or even cut if economic headwinds grow and a global recession occurs.

Furthermore, the brokerage noted that the commoditisation of consumer products could lead to pricing erosion. 

Therefore, Maybank has downgraded its rating for Aztech Global to “hold” from “buy”, with a lower target price of S$0.83 compared to S$1.39 previously. 

The revised target price reflects a multiple pegged at seven times its price-to-earnings while factoring in the current risk climate. 

There is a bright spot in the industry, however, noted Maybank – Venture Corporation : V03 0% is in a stronger position with its “well-diversified” portfolio of more than a hundred active customers, many of which are blue chips. 

The company has been able to pass on its higher costs to clients, highlighting its strong customer ties, said Seet. 

Seet expects the company to see “resilient margins” in Q3 2022, with revenue and Patmi (profit after tax and minority interests) both rising 15.6 per cent to S$890 million and S$89 million, respectively. 

He also expects that earnings will grow 14.4 per cent year on year in FY2022, as multiple end-markets recover post-pandemic, and a final dividend of S$0.50 per share, similar to previous years. Venture’s management had earlier declared a H1 2022 dividend of S$0.25 per share. 

“(The final dividend) would represent an attractive 4.7 per cent yield for FY2022, which would make it worthwhile for investors to hold Venture Corporation for a positive rerating while fundamentals remain strong,” said Seet. 

Therefore, Maybank maintained its “buy” rating for the company with a target price of S$19.55. This reflects a multiple pegged at 16 times its price-to-earnings in FY2022. 

As at 3.25 pm on Wednesday, shares of Aztech Global were trading 0.6 per cent or S$0.005 higher at S$0.805. Meanwhile, Venture’s shares were trading 0.3 per cent or S$0.05 down at S$16.15. 



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