Frencken Group - Maybank Kim Eng 2021-11-16: Time For A Breather

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

Frencken Group - Time For A Breather


Downgrade to HOLD as short-term risk reward turns neutral

  • Frencken (SGX:E28)'s 3Q21 PATMI of S$14.8m (+10.7% y-o-y) was in line. 9M21 PATMI accounted for 74% of our/consensus’ FY21E.
  • We cut Frencken's FY21-23E EPS forecast by 1-6% to factor
    1. slower 4Q21 business momentum than we previously expected; and
    2. higher cost environment.



Frencken's 3Q21 summary

  • Frencken's 3Q21 revenue rose 18.7% y-o-y, driven by semicon (+42.7%), medical (+21.8%), analytical (+29%), and consumer electronics (+18.1%). These were offset by industrial automation (-17%) and automotive (-5.6%).
  • Gross margin fell 0.5ppt y-o-y to 17.1% due to higher material and freight cost.


Frencken expects 2H21 revenue stable h-o-h

  • Frencken now expects 2H21 revenue to be stable h-o-h, from a “moderate increase” previously. In particular, the automotive segment is now expected to soften h-o-h from “stable”. Guidance for most other segments are unchanged, i.e. semiconductor (stable h-o-h), medical and analytical (higher h-o-h) and industrial automation (lower h-o-h).
  • Frencken’s medical customer have recently blamed “chips and ships” for lowering guidance recently, and we suspect Frencken’s sales potential may have been capped there as well.


Still positive for the longer run






Gene Lih Lai CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-11-16
SGX Stock Analyst Report HOLD DOWNGRADE BUY 2.50 DOWN 2.630



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