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Frencken Group - Maybank Kim Eng 2021-05-14: Momentum Continues

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

Frencken Group - Momentum Continues


1Q21 beat; maintain BUY

  • Frencken (SGX:E28)'s 1Q21 PATMI of S$14.7m (+54.7% y-o-y) accounted for 29% of our/ consensus’ FY21E, driven by strength in semicon, medical, analytical and automotive. Frencken continues to expect 1H21 revenue to be stronger h-o-h. We continue to favour Frencken for positive alignment of both cyclical and structural prospects.
  • Maintain BUY on Frencken with target price of S$1.74 (14.5x FY21E P/E).



Cyclical recovery in many sub-segments

  • Frencken's revenue grew 19.9% y-o-y to S$181.5m, driven by higher sales in semiconductor (+58% y-o-y, 36% of sales), medical (+5.7%, 13% of sales), analytical (+11%, 18% of sales), and automotive segments (+14.8%, 12% of sales). This was offset by softer industrial automation sales (-2.1%, 16% of sales).
  • Gross/net margin expanded 1.7ppt/1.8ppt y-o-y to 17.3%/8.1% respectively on the back of favourable product mix, operating leverage, and improved efficiencies.


Outlook by end-markets

  • Frencken continues to expect 1H21 revenue to be stronger h-o-h. Outlook for semiconductor (higher h-o-h), medical (higher h-o-h), analytical (modestly higher h-o-h), and industrial automation (softer h-o-h) are unchanged. Automotive is now expected to be softer h-o-h (prev: stable h-o-h), which we believe is due to to chip shortages along the supply chain creating production bottlenecks, in turn affecting Frencken.
  • Meanwhile, semiconductor strength is a result of chip shortages driving demand for both front-end and back-end equipment.

Risks






Gene Lih Lai CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-05-14
SGX Stock Analyst Report BUY MAINTAIN BUY 1.740 SAME 1.740



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