Maybank IB Maintains Positive Outlook On EMS Sector Despite Tariff Impact

KUALA LUMPUR, April 10 (Bernama) -- Maybank Investment Bank (Maybank IB) has maintained its positive outlook on the electronics manufacturing services (EMS) sector, despite the impact of new tariffs, which have weighed heavily on sector valuations.

In a note today, the investment bank pointed out that the EMS sector had not been spared from the United States' tariff measures aimed at its trading partners. 

The sector has declined by 14 per cent since the announcement. 

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“While customers are unlikely to shift manufacturing bases soon, shipment delays are expected due to ongoing US negotiations and subdued demand for consumer electronics,” Maybank IB said.

“However, valuations now appear more attractive. We are selective, favouring companies with diversified operations or high product stickiness to weather the downturn,” it added.

The bank also presented a sensitivity analysis on revenues and potential target prices for stocks under its coverage, assuming a slower growth scenario due to deferred customer orders and softer US consumer sentiment, which could dampen demand for imported consumer electronics.

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“Similar challenges are anticipated for metal fabricators such as SAM Engineering & Equipment (M) Bhd, with delays in capital expenditure for wafer fab equipment (WFE) as global players reassess their expansion strategies.

“Our sensitivity analysis suggests that for every 10 per cent decline in revenue, valuations could contract by up to 10-30 per cent, depending on margin structures,” it said.

Maybank IB highlighted that, despite the ongoing tariff war, Malaysia may remain in a favourable position compared to other ASEAN countries, due to a lower tariff imposed on the country.

“We may still attract foreign direct investment into the region, but we expect delays,” it said.

“In the near term, we believe customers are likely to absorb tariff costs under existing agreements, and a significant shift in manufacturing bases is unlikely, as outsourcing activities are expected to continue,” it added.

However, the investment bank warned that if ongoing tariff negotiations fall short of expectations, sector earnings could face further pressure.

-- BERNAMA