Singapore Tech Stocks: Trade Tariff Impact & Top BUYs for 2025 – FRKN, UMS, VALUE

UOB Kay Hian

Tuesday, 22 April 2025

Singapore Tech Manufacturing Sector: Navigating Trade Tariffs and Identifying Top Buys

The tech manufacturing sector in Singapore faces potential headwinds from recent US trade tariffs. This analysis assesses the impact on various companies, recommending selective stock picks poised for earnings growth in 2025. The report downgrades the sector to MARKET WEIGHT.

US Tariff Uncertainties and Impact Assessment

• Tariff Impact: Tariffs announced by the US have created uncertainties for manufacturing-related stocks, particularly those with significant exposure to the US market or US companies. [[1]]
• Secondary Risks: Potential secondary impacts include customers delaying capital expenditure, weaker demand, and boycotting of products. [[1]]
• Geographical Analysis: Companies are ranked based on their exposure and potential impact: [[1]]

Most to Least Affected Companies:

• Aztech: 80% of revenue from the US; key customer is a US tech company. Production in Malaysia may cushion tariff impact, but end-customer demand is weak. [[1-2]]
• Nanofilm: 70% of revenue from China, but major customer is a top US smartphone company, facing reduced demand from China. [[2]]
• AEM: 60% of revenue from Asia and 16% from the US. Impacted by reduced demand in the PC market, where its major customer has significant exposure. China is the largest PC manufacturer. [[2]]
• Venture: 25% of products sold in the US; customers are US companies selling products globally, with one customer on an unreliable entity list in China. [[2]]
• Valuetronics: 40% of revenue from the US. Production in Vietnam and new customers could cushion the tariff impact. [[2]]
• UMS: 13% of revenue from the US. Production plants in Singapore and Malaysia could mitigate tariff impact. [[2]]
• Frencken: 12% of revenue from the US, with 37% from the Netherlands. Local manufacturing in the US shields against direct tariff impact. [[2]]

Top BUY Picks: Frencken, UMS, and Valuetronics

• Frencken: Positive outlook with better revenue expected in 1H25 vs 2H24, driven by the semiconductor segment. [[2]]
• UMS: Expected to benefit from ramping up production for a new customer in its Penang plant. [[2]]
• Valuetronics: Increasing orders from new customers in Vietnam and new earnings from its GPU leasing business in Hong Kong. [[2]]

Stock Recommendations and Target Prices

STOCKS UNDER COVERAGE

Singapore Industrial Production and Purchasing Manager Index

Singapore Industrial Production (Excl. Biomedical Mfg IPI)

Purchasing Manager Index

Analyst Contact

• John Cheong: +65 6590 6623, johncheong@uobkayhian.com [[1]]

Peer Comparison and Financial Metrics

PEER COMPARISON

Investment Strategy: Selective Approach

• Downgrade to MARKET WEIGHT: Investors should be selective in the tech manufacturing sector due to potential disparities in financial performance. [[2]]
• Top Picks: Frencken and Venture are favored for their positive outlook and sequential earnings growth. [[2]]
• Other Ratings: BUY calls on Valuetronics and Aztech; SELL ratings on AEM, Nanofilm, and UMS. [[2]]

Company Analysis

Frencken Group (FRKN SP/BUY/Target: S\$1.16)

• 2024 Performance: Earnings of S\$37m (+14% yoy) were in line with expectations, driven by 7% yoy revenue growth and gross margin improvement (+1.3ppt yoy). [[2]]
• Outlook: Expects higher revenue in 1H25 compared with 2H24. Semiconductor segment is expected to drive higher revenue. Medical, analytical life sciences, industrial automation, and automotive segments are expected to remain stable. [[2]]
• Recommendation: Maintain BUY with a target price of S\$1.16, pegged to 12.5x 2025F PE, based on 0.5SD above mean PE to capture the semiconductor cycle recovery and geopolitical environment. [[2]]

UMS Integration (UMSH SP/BUY/Target: S\$1.21)

• 2024 Performance: Earnings of S\$41m (-32% yoy) were in line with expectations. 4Q24 earnings of S\$11m showed an improvement of 6% qoq. [[2]]
• Forecasts: 2025/26 EPS forecasts raised by 9%/14% respectively. [[2]]
• Growth Drivers: Volume production for a new customer with improved delivery and strong order flow. New product launches for new customers. Positive 2025 outlooks from major global semiconductor customers, driven by rising AI investment and demand. Aerospace business boosted by global air travel boom. [[2-3]]
• Recommendation: BUY with a target price of S\$1.21, based on a PE-based valuation of 17.6x 2025F EPS. This is pegged to 1SD above UMS’ historical mean PE to reflect better ramp-up in production for its new customer and improved earnings quality. [[3]]

Valuetronics (VALUE SP/BUY/Target: S\$0.78)

• 1HFY25 Performance: Net profit of HK\$91m (+17% hoh, +10% yoy) was in line with expectations. Gross margin improved for the fourth consecutive half-year period. [[3]]
• New Venture: Formed a 55-45 JV, Trio AI, with SinnetCloud Group to provide GPU and AI cloud services in Hong Kong. [[3]]
• Earnings: VALUE will earn income from leasing GPU servers and hardware to Trio AI over 60 months. Management expects Trio AI to contribute positively to revenue and profitability from FY26. [[3]]
• Recommendation: Maintain BUY with a PE-based target price of S\$0.78, pegged to 10.8x PE for FY25. This is based on 1SD above VALUE’s historical PE mean to account for potential strong demand from its four new customers and upcoming JV contribution. [[3]]

The US as a % of 2024 Revenue

*FYE Mar, based on 1HFY25 results

Venture Corporation (VMS SP/HOLD/Target: S\$13.35)

• 2024 Performance: Earnings of S\$245m (-9% yoy) were in line with expectations. [[3]]
• Forecasts: 2025/26 EPS forecasts trimmed by 6%/7% respectively due to slower-than-expected revenue recovery and weaker customer demand. [[3]]
• Challenges: Increasing policy uncertainties from the new US presidency, causing customers to cut spending and delay capex. [[3]]
• Growth Focus: Focused on growth in 2025, navigating challenges through differentiating capabilities, resilience, and long-standing partner relationships. Advancing new design and manufacturing wins across sectors. [[3]]
• Recommendation: HOLD with a target price of S\$13.35, pegged to its long-term mean PE of 15.5x 2025F or 0.5SD above its long-term mean PE to factor in the continued delay in recovery due to geopolitical uncertainties. [[3]]

Aztech Global (AZTECH SP/SELL/Target: S\$0.46)

• 1Q25 Performance: Net profit of S\$1.5m (-91% yoy) is significantly below expectations, forming only 3% of full-year estimate. Revenue declined 67% yoy. [[3]]
• Forecasts: 2025-27 EPS cut by 61-65%. [[3]]
• Strategies: Strengthening customer base by leveraging Malaysia and China manufacturing facilities and continuing disciplined cost and capital management. [[3]]
• Recommendation: SELL with a target price of S\$0.46, pegged to 1.1x 2025F book value, based on 2SD below Aztech’s long-term P/B band to capture the potential earnings trough cycle and high cash value. [[3]]

AEM Holdings (AEM SP/SELL/Target: S\$1.09)

• 2024 Performance: Earnings of S\$12m (vs S\$1m loss in 2023), beating expectations by 16% due to better-than-expected net margin. [[3]]
• Forecasts: 2025/26 EPS forecasts reduced by 9%/15% after factoring in AEM’s weaker-than-expected 1H25 revenue guidance. [[3]]
• Order Dynamics: Order pull-in from its key customer resulted in better 4Q24 but weaker 2025 revenue. [[3]]
• Recommendation: Maintain SELL with target price of S\$1.09, based on 15x 2025F PE, based on 1SD above the historical mean of AEM to reflect an earnings trough cycle. [[3]]

Nanofilm Technologies (NANO SP/SELL/Target: S\$0.50)

• 2024 Performance: Earnings of S\$8m (+147% yoy), forming 80% of full-year estimate due to elevated depreciation expense. Revenue of S\$204m (+15% yoy). [[3]]
• Business Units: Advanced material business unit (AMBU) and nanofabrication business unit (NFBU) segments grew 22% and 12% yoy respectively. [[3]]
• Outlook: Cautiously optimistic for recovery in 2025, from its largest AMBU and good growth with Asian and Chinese customers from a lower base. [[3]]
• Forecasts: 2025/26 EPS forecasts cut by 46%/48% respectively to reflect higher expansion costs and increasing headcount. [[3]]
• Recommendation: Maintain SELL with a target price of S\$0.50. Valued based on 25x 2025F EPS, pegged to -0.5SD to its long-term forward mean, due to elevated costs from multiple expansion projects and weakness in net margin. [[4]]

Sector Catalysts

• Increasing capex spending by upstream global tech manufacturers. [[4]]
• Better-than-expected 1Q25 sales and earnings, improved guidance for 2H25. [[4]]

Risks

• Reduced demand for electronic goods due to a global recession. [[4]]
• Escalation of geopolitical tension and trade conflict between the US and China. [[4]]

Relative Share Price Comparison

Relative Share Price Comparison of Singapore Tech Stocks

Relative Share Price Comparison of Global Semiconductor Stocks

Peer Comparison of Global Semiconductor Players

PEER COMPARISON OF GLOBAL SEMICONDUCTOR PLAYERS

Historical PE Bands

FRENCKEN GROUP HISTORICAL PE BAND

UMS HOLDINGS HISTORICAL PE BAND

VALUETRONICS HISTORICAL PE BAND

VENTURE CORP HISTORICAL PE BAND

AZTECH GLOBAL HISTORICAL PE BAND

AEM HISTORICAL PE BAND

NANOFILM HISTORICAL PE BAND