Frencken Group - Maybank Kim Eng 2021-02-26: Cyclical Recovery Continues

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

Frencken Group - Cyclical Recovery Continues


Frencken's 2H20 beat despite impairment; Maintain BUY

  • Despite an impairment amounting S$6.2m, Frencken Group (SGX:E28)'s 2H20 PATMI of S$23.8m (+5% y-o-y) was ahead of our and street’s expectations. This was due to grants and lower than expected
    1. negative FX impact to P&L and
    2. effective tax rate.
  • Management expects 1H21 to grow h-o-h, reinforcing our view of the ongoing cyclical recovery.
  • Our FY21-23E forecasts for Frencken are largely unchanged, and we maintain BUY with ROE-g/COE-g target price of S$1.39 (1.6x FY21E P/B).



Expects 1H21 to be stronger h-o-h

  • Amid difficult business conditions due to COVID-19, Frencken's 2H20 revenue fell 2.3% y-o-y to S$328.1m. Semicon grew 50.6% y-o-y on the back of the global equipment spending upswing, but this was offset by declines in other sub-segments such as industrial automation (-38%) and medical (- 8%).
  • Frencken's management expects 1H21 revenue to increase h-o-h, primarily driven by semicon, medical and analytical sub-segments. While automotive is expected to be flattish h-o-h, management sees scope for some potential upside.


Impairment relates to deferred development costs




End-markets broadly favourable






Gene Lih Lai CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-02-26
SGX Stock Analyst Report BUY MAINTAIN BUY 1.390 SAME 1.390



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