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Frencken Group - CGS-CIMB Research 2021-05-12: Semicon Leads The Charge Into FY21

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

Frencken Group - Semicon Leads The Charge Into FY21

  • Frencken’s1Q21 net profit was above expectations at 32.3/ 29.5% of our/consensus’ FY21F forecasts.
  • The better-than-expected performance was driven by the semicon segment which registered a 58% y-o-y revenue growth in the quarter.
  • We believe the semicon segment will continue to exhibit strong growth momentum, driving our higher target price. Reiterate ADD.



Semicon shines in 1Q21

  • Frencken (SGX:E28)'s revenue grew 19.9% y-o-y in 1Q21 to S$181.5m driven by higher sales in the semiconductor (+58.0% y-o-y), medical (+5.7% y-o-y), analytical (+11.0% y-o-y) and automotive (+14.8% y-o-y) segments. Industrial automation’s revenue fell 2.1% y-o-y to S$28.7m in 1Q21. Net profit grew 54.7% y-o-y to S$14.7m (1Q20: S$9.5m).
  • At 32.3/29.5% of our/consensus’ FY21F forecasts, Frencken’s 1Q21 performance was above expectations. The improvement in net profit was driven by revenue growth and better sales mix/operational efficiencies which contributed to a higher gross profit margin of 17.3% in 1Q21 versus 15.6% in 1Q20.
  • As at end-Mar 2021, Frencken’s net cash balance was S$93.7m.


Frencken’s business segment outlook

  • Frencken guided that it expects its 1H21F revenue to exceed that of 2H20 (S$328.1m), driven by higher sales from most of its key business segments. The semiconductor segment is expected to post higher revenue in 1H21 than in 2H20 (S$98.4m), spurred by strong demand for front-end and back-end semiconductor equipment.
  • The medical segment’s revenue is anticipated to increase in 1H21 from 2H20’s S$41.1m, while the analytical segment is expected to record modest revenue growth in 1H21 compared to 2H20’s S$61.3m. Revenue for both the industrial automation segment and automotive segment in 1H21 are anticipated to soften from their 2H20 numbers of S$60.8m and S$46.1m, respectively.

Reiterate ADD, strong semicon momentum drives earnings upgrade






William TNG CFA CGS-CIMB Research | https://www.cgs-cimb.com 2021-05-12
SGX Stock Analyst Report ADD MAINTAIN ADD 1.87 UP 1.610



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