Date of Report: 3 October 2024
Broker: UOB Kay Hian
Positive Outlook for 2H24
Frencken is projecting a more bullish outlook with expectations of better revenue performance in the second half of 2024 compared to the first half. This optimism is primarily driven by the semiconductor segment, while other segments are anticipated to remain stable.
Segment Performance Analysis
For the first half of 2024 versus the first half of 2023, Frencken’s outlook for key business segments includes:
- Semiconductor: Expecting higher revenue.
- Medical: Projected to be stable.
- Analytical Life Sciences: Anticipated to remain stable.
- Industrial Automation: Forecasted to see decreasing revenue.
- Automotive: Expected to be stable.
The company has noted delays in shipments for some sizable ASML orders in the second quarter of 2024, which are now expected to be recognized in the third quarter of 2024. Increased utilization is anticipated to enhance margins.
Long-term Growth Strategy
Frencken is well-positioned for long-term growth due to its diverse exposure to multiple market segments in the high-technology industry. The company plans to focus on investments in new programs to enhance its competitive edge.
Investment Recommendation and Target Price
UOB Kay Hian maintains a “BUY” recommendation for Frencken, with a target price set at S$1.74. This valuation is based on a price-to-earnings (PE) ratio of 17.0x for 2024, reflecting a position of 2 standard deviations above the long-term average PE.
Key Catalysts for Growth
Key events that could drive Frencken’s share price higher include:
- Higher-than-expected factory utilization rates.
- Improved cost management practices.
- Successful introduction of new products and innovations across its diverse market segments.
