In this article, you will learn 5 Singapore semiconductor supplier stocks which could benefit from emerging 5G technology, requiring 5 different stock strategies for investing or trading.
1) Micro-Mechanics Holdings (SGX: 5DD) – Singapore Semiconductor Giant Stock
2) UMS Holdings (SGX: 558) – Singapore Semiconductor Giant Stock
3) AEM Holdings (SGX: AWX) – Singapore Semiconductor Stock
4) Frencken Group (SGX: E28) – Singapore Semiconductor Stock
5) Avi-Tech Electronics (SGX: BKY) – Singapore Semiconductor Stock
Over the past few decades, semiconductor sector is driven mainly by telecommunication (eg. smart phones and related products) and consumer electronics (eg. PC, portable devices, etc). Telco sector introduces new Generation of technology about every 10 years (1980s = 1G with analog voice, 1990s = 2G with digital voice, 2000s = 3G with mobile data, 2010s = 4G with mobile broadband, 2020s = 5G with much faster system to maximize Internet of Things – IoT). Current development of 5G, would help to support growth in global semiconductor value chain over the next decade.
Semiconductor (front-end / back-end) technology development milestones are driven by Moore’s Law which predicted IC capacity or density would double itself about every 18 months. So, telco technology Generation of every 10 years is related to Moore’s Law 2X cycle of every 18 months (1.5 year):
Telco / Semiconductor = (10 / 1.5) = 6.67 times of doubling
So, telco capacity in every Generation of 10 years = 2^(6.67) = 102 times difference. Indeed, 5G technology speed and capacity is about 100X faster or more than current 4G technology, supported by Moore’s Law (力争上游).
Gordon Moore only did a rough extrapolation of future technology a few decades ago. However, it serves as a roadmap for smart scientists to challenge the technology limit at each junction, motivating giant semiconductor and telco companies to invest billions of dollars in R&D to achieve these goals which Moore’s Law is still valid today.
Unique technology knowhow (could be in the form of technical patents or trade secrets with amazing powerful new products) is a strong economic moat for a technology company, especially with a stock. Every good news in leadership in new technology (eg. from 4G to 5G, from 7nm to 5nm semiconductor technology, etc) would help to grow the share prices. In fact, the semiconductor or telco company investor earn much more from stock market than from the actual business. The business is simply a driver (if positive growing results) to drive the stock prices. So, it is important for a stock investor to differentiate among business investment (pure fundamental), stock investment (long term) and stock trading (short term).
There are several ways to invest in 5G related companies, for example through major mobile phone manufacturers (eg. Apple – NASDAQ: AAPL, Xiaomi – HKEx: 1810, etc), global and local Telco companies (eg. AT&T – NYSE: T, Singtel – SGX: Z74, etc), leading semiconductor companies (eg. TSMC – NYSE: TSM, Intel – NASDAQ: INTC, AMD – NASDAQ: AMD, Nvidia – NASDAQ: NVDA, Qualcomm – NASDAQ: QCOM, etc) or other related supplier businesses.
There are 53 Electronics stocks and 28 IT stocks, total 81 Technology Stocks in Singapore which have connections with semiconductor industry:
AEM Holdings (SGX: AWX), Accrelist Limited (SGX: QZG), Acma Limited (SGX: AYV), Adventus Holdings (SGX: 5EF), Allied Technologies Limited (SGX: A13), Amplefield Limited (SGX: AOF), Avi Tech Electronics (SGX: BKY), Ban Leong Technologies (SGX: B26), CDW Holding (SGX: BXE), CFM Holdings (SGX: 5EB), CPH Limited (SGX: 539), Chuan Hup Holdings (SGX: C33), Creative Technology (SGX: C76), Datapulse Technology (SGX: BKW), Dragon Group International (SGX: MT1), Dutech Holdings (SGX: CZ4), Ellipsiz Limited (SGX: BIX), Excelpoint Technology (SGX: BDF), Frencken Group (SGX: E28), Global Invacom Group (SGX: QS9), GP Industries (SGX: G20), Global Testing Corporation (SGX: AYN), Grand Venture Technology (SGX: JLB), HGH Holdings (SGX: 5GZ), Hu An Cable Holdings (SGX: KI3), JEP Holdings (SGX: 1J4), Jadason Enterprises (SGX: J03), Karin Technology Holdings (SGX: K29), Libra Group (SGX: 5TR), Manufacturing Integration Technology (SGX: M11), Maruwa Yen1k (SGX: M12), MeGroup Limited (SGX: SJY), Micro-Mechanics Holdings (SGX: 5DD), Plastoform Holdings (SGX: AYD), Polaris Limited (SGX: 5BI), Powermatic Data Systems (SGX: BCY), Renaissance United (SGX: I11), SEVAK Limited (SGX: BAI), SUTL Enterprise (SGX: BHU), Serial System (SGX: S69), Shinvest Holding (SGX: BJW), Sunright Limited (SGX: S71), Sunrise Shares Holdings (SGX: 581), TT International (SGX: T09), Thakral Corporation (SGX: AWI), The Place Holdings (SGX: E27), Trek 2000 International (SGX: 5AB), Valuetronics Holdings (SGX: BN2), Venture Corporation (SGX: V03), Willas-Array Electronics Holdings (SGX: BDR), World Precision Machinery (SGX: B49), Alpha Energy Holdings (SGX: 5TS), Alset International (SGX: 40V), Artivision Technologies (SGX: 5NK), Asiatravel.com Holdings (SGX: 5AM), A-Smart Holdings (SGX: BQC), Azeus Systems Holdings (SGX: BBW), Boustead Singapore Limited (SGX: F9D), Captii (SGX: AWV), Challenger Technologies (SGX: 573), CSE Global (SGX: 544), DISA (SGX: 532), International Press Softcom (SGX: 571), ISDN Holdings (SGX: I07), Keppel DC Reit (SGX: AJBU), Koyo International (SGX: 5OC), M Development (SGX: N14), Mapletree Industrial Trust (SGX: ME8U), New Silkroutes Group (SGX: BMT), New Wave Holdings (SGX: 5FX), PEC (SGX: IX2), Plato Capital (SGX: YYN), Procurri Corporation (SGX: BVQ), Rich Capital Holdings (SGX: 5G4), Silverlake Axis (SGX: 5CP), SinoCloud Group (SGX: 5EK), Stratech Group (SGX: BRR), Synagie Corp (SGX: V2Y), YuuZoo Networks Group Corp (SGX: AFC).
Global and local semiconductor stocks are mostly cyclic in nature, following the economic cycles (affecting consumer’s demand with purchasing power, usually stronger business during bullish economy). US NASDAQ stock exchange has many technology stocks, including semiconductor sector, therefore its stock index also behaves in cyclical way, suitable with “Buy Low Sell High” Optimism Strategy. Few technology stocks could be the leader for long term (a few decades) due to the competitive technology development (including possible mastering of knowhow by competitors with time or by chance). Therefore, a smart investor needs to monitor a technology stock (could be semiconductor, telco, etc), ensuring it is a giant stock (applying Dr Tee criteria) each year before continuing long term investing, otherwise safer to position only in short term or medium term trading during bullish cycle of semiconductor sector.
In Singapore, 5G related stocks are mainly semiconductor suppliers (eg. process/testing equipment, precision engineering, printed circuit board, etc), smaller players but at least 2 are giant stocks (based on Dr Tee giant criteria). Semiconductor sector is considered essential business during Covid-19 pandemic, manufacturing could still continue in Singapore and some other countries.
Here, 5 Singapore semiconductor supplier stocks with reasonably good fundamental (growing business with low debt) are selected for review, potentially could benefit from 5G business (driven by clients’ demand). However, each 5G stock requires different positioning of stock strategy, either for long term investor or short term trading. Only Micro-Mechanics and UMS are giant stocks for investing but other stocks may be considered for trading.
1) Micro-Mechanics (SGX: 5DD) – Singapore Semiconductor Giant Stock
Micro-Mechanics designs and manufactures high precision parts and tools used in applications for the wafer-fabrication (front-end) and assembly processes (back-end) of the semiconductor industry. The company operates in 5 countries: Singapore, Malaysia, Philippines, USA, and China.
Micro-mechanics is a multi-role giant stock, suitable for different personalities of investors. It could be a long term growth stock (supported by growing businesses with strong cash flow and little debt). It is also ideal for medium term cyclic trading with “Buy Low Sell High” optimism strategy. It may be considered as a defender for dividend stock investor with about 6% dividend yield currently. Each of the 3 stock strategies require different entry and exit plans.
2) UMS (SGX: 558) – Singapore Semiconductor Giant Stock
UMS provides high precision front-end semiconductor components, and electromechanical assembly and final testing services. Semiconductor is main business. It operates manly in Singapore, Malaysia, Taiwan, US, South Korea and China.
UMS is a highly cyclic giant stock (despite fundamentally strong), currently at moderate high optimism, therefore not suitable for consideration for long term investing (requiring a global financial crisis with bearish semiconductor cycle before the next entry with condition business fundamental will still be strong). UMS is ideal for medium term cyclic trading with “Buy Low Sell High” optimism strategy, recovering well from nearly 50% price correction in recent global stock crisis due to Covid-19 pandemic. It may be considered as a mid-fielder for mid-term investing with about 4% dividend yield while waiting for capital gains.
3) AEM (SGX: AWX) – Singapore Semiconductor Stock
AEM provides system testing and handling solutions for semiconductor and electronics companies in Asia and globally. It operates through Equipment Systems Solutions, System Level Test & Inspection, Micro-Electro-Mechanical Systems, and Test and Measurement Solutions segments
AEM is a very cyclic stock in long term (partly due to cyclic business of semiconductor cycle), currently at high optimism, therefore not suitable for consideration for long term investing (requiring a global financial crisis with bearish semiconductor cycle before the next entry with condition business fundamental will still be strong). AEM is suitable for medium term momentum trading with “Buy Low & Hold” position trading strategy, supported by strong business performance over the past 5 years due to bullish semiconductor cycle. It may also be considered as a striker for very short term momentum trading with “Buy High Sell Higher” strategy but requiring strict compliance with S.E.T. (Stop Loss / Entry / Target Prices) trading plan.
4) Frencken (SGX: E28) – Singapore Semiconductor Stock
Frencken operates as a capital and consumer equipment service provider worldwide. It has 2 segments, Mechatronics and Integrated Manufacturing Services (IMS). It only has partial business related to semiconductor, therefore closer to a technology stock with diversified sectors.
Frencken is a cyclic stock in long term (despite reasonably strong business fundamental over the past 5 years, following economic cycle), currently at high optimism, therefore not suitable for consideration for long term investing (requiring a global financial crisis with low optimism before the next entry with condition business fundamental will still be strong). Frencken is ideal for medium term cyclic trading with “Buy Low Sell High” optimism strategy, recovering well from nearly 50% price correction in recent global stock crisis due to Covid-19 pandemic. It may also be considered as a striker for very short term momentum trading with “Buy High Sell Higher” strategy but requiring strict compliance with S.E.T. (Stop Loss / Entry / Target Prices) trading plan. It has particularly strong business fundamental in 2019, supporting the rising prices then, careful monitoring of future quarterly financial performance is required for short term trading.
5) Avi-Tech Electronics (SGX: BKY) – Singapore Semiconductor Stock
Avi-Tech Electronics provides burn-in, manufacturing and printed circuit board assembly, and engineering services for the semiconductor, electronics, life sciences, aviation, and other industries. It only has partial business related to semiconductor, therefore closer to a technology stock with diversified sectors. It serves customers in Singapore, US, Malaysia, Germany, Philippines, Thailand, Taiwan, and China.
Avi-Tech is an average performance technology stock in long term (despite reasonably good business fundamental over the past 5 years, following economic cycle), currently at moderate high optimism, therefore not suitable for consideration for long term investing. Avi-Tech is also not a good choice for trading due to lack of price strength. It may be considered as a mid-term defender for dividend stock investor with about 6% dividend yield currently. However, since there are so many better choices of 5G stocks (even Micro-Mechanics or Singtel also has 6% dividend yield, supported by stronger businesses), Avi-Tech is clearly a choice from the bottom of the list, reviewed for the sake of comparison with other 5G stocks.
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Technology stocks (including semiconductor) could be exciting experience for an investor, especially with cyclic investing. Sometimes, a strong momentum technology stock could surge more than 100% in price in less than 1 year. A stock trader could be in dilemma, whether to sell (potential “risk” is may miss further upside in prices) or to hold (potential risk is huge price correction during stock crisis, eg. price may cut by half in recent Covid-19 pandemic).
A simple and powerful stock strategy is to apply “50/50” method, i.e. whenever stock price of a giant stock is doubled, just sell half of the stocks, since capital is recovered (with 2X price, selling 50% stocks), an investor has stronger holding power for the remaining 50% position as the worst could happen in future would be 0% gain, not losing money at all (assuming remaining 50% stocks drop to $0, possible worst case). However, for technology or semiconductor stocks which are cyclic at high optimism, it is relatively safer to sell 100% of stock first, buying back the same giant stocks at lower optimism in the next opportunity.
Micro-Mechanics, UMS and AEM are not 30 STI index component stocks but they are much stronger than most of these blue chip stocks (investor has to focus only on giant stocks for investing):
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), Hongkong Land (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).
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