KUALA LUMPUR (June 16): AmInvestment Bank Bhd said today Malaysia’s electronic manufacturing services (EMS) sector's prospects are positive amid expectations of strong order flow from multiple customers supported by capacity expansion plans despite the EMS industry contending with the impact from Covid-19-driven movement restriction policies to curb the spread of the pandemic.

AmInvestment analyst Dalilah Fairoz wrote in a note today that despite the Covid-19 pandemic, the EMS sector’s order forecasts remain strong across multiple customers.

"We have an 'overweight' recommendation on the sector but we may downgrade the sector to 'neutral/underweight' if: (i) Covid-19 weakens global economic conditions which could potentially dampen demand in customers’ products, especially if vaccine progress is delayed; (ii) labour issues arise relating to labour costs and worker shortages; (iii) sudden loss or orders and/or key customers; and (iv) worsening performance of overseas operations due to longer-than-expected recovery in sales orders.

"The sector has been a beneficiary (of strong order flow) as companies diversify their supply chains away from China and into Southeast Asia, leading to the securement of higher orders and/or new customers. In our view, the pullback in share prices following recent news flow presents a window of opportunity for investors,” Dalilah said.

AmInvestment’s Malaysia EMS sector coverage comprise ATA IMS Bhd, SKP Resources Bhd, PIE Industrial Bhd and Uchi Technologies Bhd, according to Dalilah.

More to come