Frencken Group - RHB Invest 2020-10-15: Twin Drivers To Boost EPS; Stay BUY

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

Frencken Group - Twin Drivers To Boost EPS; Stay BUY

  • 2020 should be a muted year for Frencken due to the drop in its industrial automation business, as the group’s key customer is likely to launch a new product in FY21. However, we expect this segment to recover in FY21, while the group should enjoy strong growth in its semiconductor division.
  • FY21F should be a better year, and we expect Frencken to record decent EPS growth of 12.3% y-o-y then.



Riding on the semiconductor uplift.

  • Frencken Group (SGX:E28)’s semiconductor segment is likely to see strong double-digit growth this year, as it should benefit from the uplift in the chip industry. Management has also guided for higher revenue in 2H20F, due to a pick-up in orders from customers in Asia and Europe.
  • Based on our channel checks and the performance of companies in the supply chain of the semiconductor sector, we believe this segment will continue to be a key positive catalyst for Frencken’s EPS growth in 2020F.


Factories globally have resumed production.

  • At present, all of Frencken’s manufacturing sites in Asia, Europe and the US have resumed normal operations. In addition, the initial supply chain disruptions caused by the COVID-19 lockdown measures have largely been resolved.


Growth in industrial automation will likely come in FY21.

  • Frencken’s key customer in industrial automation has delayed its new product launch, due to supply chain issues. As such, we believe the launch will likely only happen in FY21. As a result, we expect this segment to continue to take a hit, and only see recovery in FY21.
  • Management also guided that the industrial automation segment will remain stable in 2H20, after seeing a 35- 40% drop y-o-y in business, in 1H20.

Twin growth drivers for FY21F.






Jarick Seet RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-10-15
SGX Stock Analyst Report BUY MAINTAIN BUY 1.160 SAME 1.160



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