The first 6 weeks of 3Q22 has seen the technology sector lead the global stock market, after ranking as the laggard sector in both 1Q22 and 2Q22. The 6 weeks have seen the SOX generate a 19% total return, after the declines for the preceding 2 quarters saw the global semiconductor benchmark decline 33%.
Across the 40 largest Index weights of the iEdge SG Advanced Manufacturing Index, Aztech Global, UMS, Frencken, Venture Corp, ISDN, Valuetronics & AEM have ranked among the strongest 10 performers of the past 6 weeks, averaging 9% total returns.
After the Friday market close, AEM reported that it is on track for a record FY, revising FY22 revenue guidance to S$750mi to S$800mil, with revenue for 1H22 increasing by 181% y-o-y, and 2 new customer wins in high-performance computing/artificial intelligence and application processors for mobility.
Global technology stocks, in addition to e-commerce retailers make up approximately 25% of the FTSE Developed Index, with the slump in these industries in 1Q22 and 2Q22 driving the decline of the broader Developed economy benchmark through the end of June. For the first 6 weeks of 3Q22, the 10% gain of the FTSE Developed Index has largely hinged on the Philadelphia Semiconductor index (SOX) generating a 19% total return.
Similarly, among the 40 largest Index weights of the indicative iEdge SG Advanced Manufacturing Index, the 10 best performing stocks for the past 6 weeks have included seven technology stocks. These have included
- Aztech Global (SGX:8AZ),
- UMS (SGX:558),
- Frencken (SGX:E28),
- Venture Corporation (SGX:V03),
- ISDN (SGX:I07),
- Valuetronics (SGX:BN2), and
- AEM (SGX:AWX).
Together the 7 stocks averaged 9% total returns over the six weeks, reducing their average decline in total return to 12%.
| Strongest Performing 10 Stocks with Significant Manufacturing Activity in 3Q22-to-date |
SGX Code |
QTD Total Return % |
YTD Net Institutional Flow (S$M) |
YTD Total Return % |
31Dec2019 - 12Aug2022 Total Return % |
|---|---|---|---|---|---|
| Aztech Global | 8AZ | 15 | -9.1 | 13 | N/A |
| UMS | 558 | 10 | -51.9 | -18 | 63 |
| Frencken Group | E28 | 10 | -44.9 | -36 | 43 |
| Venture Corporation | V03 | 9 | -76.8 | 2 | 25 |
| China Sunsine Chemical | QES | 8 | -1.3 | 2 | 1 |
| Food Empire | F03 | 8 | -4.7 | -25 | -5 |
| ISDN | I07 | 7 | -4.1 | -28 | 133 |
| Valuetronics | BN2 | 6 | 1.4 | 2 | -24 |
| Delfi | P34 | 6 | -4.5 | 7 | -11 |
| AEM | AWX | 6 | -42.4 | -16 | 128 |
| Average | 9 | -10 | 39 |
Source: SGX, Refinitiv, Bloomberg (Data as of 12 August 2022)
After the 12 Aug close, 3 of the above 7 stocks associated with the Technology Sector - AEM Holdings, UMS Holdings and ISDN Holdings reported 1H22 results.
AEM Holdings reported 1H22 revenue increased by 181% y-o-y to reach a record high first half revenue of S$540.5 million for 1H2022, driven by volume ramp up for the new generation System Level Testing handlers, Burn-In Test handlers, related consumables and peripheral tools, and contributions from CEI Pte Ltd which the Group acquired in March 2021. The Group also highlighted it had made new customer wins in high-performance computing/artificial intelligence and application processors for mobility. AEM Holdings revised its FY22 revenue guidance of the Group to be in the range between S$750 million to S$800 million, while do expecting 2H22 revenue to be lower than 1H22.
UMS Holdings also reported its 1H22 sales and net profit pushed past its recent performance records to hit S$171.3 million (or about 63% of its FY21 sales) and S$42 million (about 73% of FY21 net profit) respectively. The Group noted that the JEP Holdings acquisition not only gave UMS Holdings a shot in the arm by boosting its ability to ramp up production despite a tight labour situation in Malaysia but also lifted its top and bottom-lines.
ISDN Holdings reported a 12.2% y-o-y decrease in revenue to S$190.7 million in 1H22, compared to S$217.2 million in 1H21, largely due to business disruptions from the implementation of strict COVID-19 lockdown measures in the PRC in April and May 2022. Despite the supply chain disruptions, the Group noted it had continues to witness broad-based and long-term demand for industrial automation solutions in both the PRC and the Southeast Asia countries where it operates.
Relevant drivers for the Sector going into 2023 include downstream orders and further downstream consumer demand, the sub-drivers of 5G and automotive markets, as well as cloud services and data centres, while potential supply chain disruptions and labour costs on the inflation front.
