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DECEMBER 24, 1999 VOL. 25 NO. 51
Kuala Lumpur Tech Frenzy
Too many investors chasing too few shares
By ASSIF SHAMEEN
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 Illustration by Emilio Rivera III for Asiaweek |
"There are some good tech companies, but this rally is starting to make a mockery of fundamentals," cautions Lai Tak Heong, research chief at SG Securities Asia in the capital. "Far too many people are chasing far too few shares." Those lines won't change too many minds in KL (or in Seoul, Singapore, or even Wall Street, for that matter). Rather, investors local and foreign are busy buying everything from microchip makers to Internet service providers (ISPs).
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No matter, the 10 or so KLSE-listed concerns with some technology component are getting plenty of attention from investors scouring the world for high-tech stocks. Malaysian Pacific Industries (MPI) and Unisem are packagers and assemblers of microchips, while Globetronics and AIC put them together and test them. Eng Teknologi, Mesiniaga and CSA Holdings distribute computers and peripherals; they are also software resellers and system integrators. All seven stocks are jumping, mainly because they are so few. Says Lai: "Malaysians have watching the global tech frenzy for over a year and wondering when they'd get a piece of the action. Now everyone's just buying tech stocks."
The biggest investors are foreign investment-fund managers. They have had very little exposure to Malaysia since its currency controls led to its removal from international stock indexes tracked by fund managers. So far, interest is mainly in semiconductor stocks like MPI, Unisem and Globetronics, with other technology counters rising from the spillover effect. "You can buy IC [integrated circuit] packager Amkor in Korea, Advanced Semiconductor in Taiwan, or MPI in Malaysia," says a Singapore-based fund manager. Despite the recent surge, he adds, MPI was still cheaper than most IC packagers. Its price was 14 times earnings, compared with more than 20 for its Asian peers.
Chang Chiew Yee, technology analyst at Salomon Smith Barney in Singapore, says: "Typically MPI and Unisem have sold at steep discounts because investors thought Malaysian IC packagers were small and in low-end businesses. But it is now dawning on investors that the discounts are just too steep. Malaysian companies are basically into micropackaging and really aren't competing with Amkor or ASM as such. Really, if you want exposure in Malaysia and are looking for high growth, few stocks can match MPI or Unisem."
Analysts expect MPI sales to grow 60% to $423 million in the year to next June, with earnings per share surging sixfold. Its controlling shareholder, Hong Leong Industries of local billionaire Quek Leng Chan, plans to float MPI's microchip packaging subsidiary Carsem on the Nasdaq next year. That could add 50% to MPI's market capitalization of $1.2 billion, going by the valuations other Asian chipmakers got in the U.S. this year.
Unisem has no Nasdaq angle, but it has better margins on its higher-end packaging. Next month its stock will join the closely followed MSCI indexes. That should prompt purchases by fund managers.
What about Internet firms? The country has only two ISPs: Telekom Malaysia, with 60% of the market, and Jaring. But the country's 550,000 Net subcribers are very few for its 23 million population - and its ambitions to be a regional multi-media hub. Analysts say that having put its house in order after the Asian Crisis, Telekom will aggressively expand its Net business. Competition in ISPs is on, with big price drops and subscription leaps ahead. Telekom is up 15% the past few weeks.
Tan Chong Koay, a Malaysian investment manager who runs several ASEAN funds, says despite the bull run in technology stocks, "Malaysia is just catching up with the worldwide trend." And more money may be chasing shares when the country's stocks return to the MSCI barometers. So for now, don't expect many punters to pay much attention to all the finger-wagging over fundamentals.
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