Frencken Group - CGS-CIMB Research 2020-02-28: Core Net Profit Above On Strong Margins

FRENCKEN GROUP LIMITED (SGX:E28) | SGinvestors.io FRENCKEN GROUP LIMITED (SGX:E28)

Frencken Group - Core Net Profit Above On Strong Margins

  • Frencken's FY19 core net profit was 22% above our expectations due to better cost control and contribution from higher gross profit margin filter business.
  • The Covid-19 outbreak is a risk. We understand that Frencken’s factories in China have resumed operations.
  • Reiterate ADD call and with a higher Target Price of S$1.06 (unchanged 10x P/E multiple) as we roll over to FY21F.



FY19 core net profit above expectations

  • Frencken Group (SGX:E28)'s FY19 core net profit of 46.5m was 22% above our expectation and 19% above Bloomberg consensus. The better-than-expected performance was driven by margin expansion due to better profitability at the filter business.
  • Better cost control also helped as administration and general expenses fell by 8.1% y-o-y.
  • A higher final DPS of 3 Scts was declared (FY18: 2.14 Scts). Frencken's net cash as at end-Dec 2019 was S$69.2m.
  • Mechatronics division’s revenue fell 4.9% y-o-y in 4Q19 while the IMS division’s revenue fell 8.6% y-o-y, in line with Frencken’s guidance.


Outlook

  • For 1Q20F, Frencken expects y-o-y revenue growth in its Semicon and Medical segments. The Analytical, Industrial Automation and Automotive segments are expected to see y-o-y revenue decline.
  • The Covid-19 outbreak is a risk and we understand that Frencken’s factories in China have resumed operations.


Reiterate ADD






William TNG CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-02-28
SGX Stock Analyst Report ADD MAINTAIN ADD 1.06 UP 0.940



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