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Frencken Group - Maybank Kim Eng 2021-08-16: Diversity Driving Strength

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

Frencken Group - Diversity Driving Strength


Strong semi momentum drives 1H21 beat for Frencken; BUY

  • Frencken (SGX:E28)'s 1H21 PATMI rose 67.2% y-o-y to S$31.3m, surpassing our and consensus’ estimates. This was driven by stronger-than-expected semicon momentum and robust recovery in automotive.
  • We raise FY21-23E EPS by 6-15%, and our target price is now based on 15.5x FY22E P/E (from 14.5x FY21E) as we believe:
    • cyclicality risks have moderated; and
    • margin expansion trend remains on track.
  • We believe key risk is components shortages worsening in the various supply chains Frencken is exposed to.
  • Maintain BUY.


Automotive segment drove Frencken's margin expansion in 1H21

  • Frencken's 1H21 revenue rose 28.3% y-o-y to S$375.3m, largely on the back of semicon (+60.2% y-o-y) and automotive (+40.3% y-o-y) strength. Frencken registered growth with all semicon customers, from the front-end to the back-end. Medical (+11.5% y-o-y) benefitted from the return of elective surgeries, while Analytical (+29.4%) recovered as a key customer’s products saw a rebound following some challenges last year.
  • On the recovery of the automotive segment, gross margin expanded by 1.9ppt y-o-y to 17.4% on the recovery of the automotive segment, while the integrated manufacturing services segment margins swung 12.5ppt y-o-y to 11%.

Frencken's 2H21 revenue likely

  • Frencken expects side tightness can be alleviated. Meanwhile, the medical and analytical segments are expected to enjoy sequential strength. Industrial automation (IA) should be softer h-o-h.


We see reduced cyclicality risks for Frencken






Gene Lih Lai CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-08-16
SGX Stock Analyst Report BUY MAINTAIN BUY 2.63 UP 2.000



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