Frencken Group Ltd: Navigating Through Industry Headwinds

Frencken Group Ltd, a global integrated technology solutions company, has faced a challenging 3Q24 with earnings of S\$9 million, marking a 29% year-on-year increase but remaining flat quarter-on-quarter. The earnings formed only 61% of the full-year forecast due to slower-than-expected revenue recovery. Despite an 8% revenue growth driven by semiconductor and analytical life sciences segments, the medical and automotive segments underperformed.

Frencken’s guidance suggests an uneven recovery, maintaining a ‘BUY’ recommendation with a target price of S\$1.31. The company’s strategic focus remains on supporting key customers and capitalizing on potential market recovery. However, the global economic environment poses significant uncertainties due to geopolitical tensions and trade risks.

Financial forecasts for 2024-2026 anticipate a moderate recovery with revenue estimates cut by 4% and earnings by 16-17% to reflect weaker results. The valuation is pegged to a 14x 2025F PE, adjusted for a slower earnings recovery rate.

Peer Analysis: A Comparative Overview

SGX-listed Peers

Among Frencken’s Singapore Exchange-listed peers, Venture Corporation Ltd (VMS SP) stands out with a trading price of SGD 12.9 and a market cap of USD 2,785 million. The company exhibits a PE ratio of 15.3x for 2024F, highlighting its stable position in the market with an attractive dividend yield of 5.8%.

AEM Holdings Ltd (AEM SP), trading at SGD 1.43, offers a contrasting profile with a high PE ratio of 45.5x for 2024F. Despite its smaller market cap of USD 334 million, AEM focuses on advanced manufacturing solutions, albeit with a lower dividend yield of 0.5%.

UMS Holdings Ltd (UMSH SP) positions itself with a market cap of USD 557 million and a trading price of SGD 1.05. It presents a balanced PE ratio of 18.0x for 2024F, complemented by a robust dividend yield of 4.2%, reflecting its steady growth trajectory.

Semiconductor Sector

Within the semiconductor arena, ASML Holding NV (ASML NA) is a dominant player with a towering market cap of EUR 264,872 million and a trading price of EUR 627.2. Its PE ratio of 32.5x for 2024F underscores its leadership in the sector, bolstered by a remarkable ROE of 47.3%.

Intel Corporation (INTC US), despite its vast market cap of USD 107,135 million, presents a nuanced picture with a PE ratio not applicable for 2024F. The company continues to navigate through transitional challenges with a modest dividend yield of 1.6%.

Industrial Automation Sector

Seagate Technology PLC (STX US) and Western Digital Corporation (WDC US) are stalwarts in the industrial automation sector. Seagate’s trading price of USD 97.02 and a high PE ratio of 60.6x for 2024F indicate its premium valuation, while Western Digital’s focus on operational efficiency is evident with its lower PE ratio of 8.6x for 2025F.

Analytical & Medical Sector

Thermo Fisher Scientific Inc (TMO US) leads the analytical and medical segment with a market cap of USD 191,744 million and a trading price of USD 501.29. Its stable growth is reflected in a PE ratio of 23.1x for 2024F and a ROE of 16.5%.

Oxford Instruments PLC (OXIG LN) and Koninklijke Philips NV (PHIA NA) also contribute significantly to this sector. Oxford Instruments, priced at GBP 2040, offers a PE ratio of 19.0x for 2024F, while Philips, with a market cap of EUR 24,304 million, suggests a promising future with a PE ratio of 17.0x for 2024F.

Automotive Peers

The automotive sector features Valeo SA (FR FP) and Visteon Corporation (VC US) as notable players. Valeo, with a market cap of EUR 2,202 million, trades at EUR 8.518 with a PE ratio of 7.4x for 2024F, indicating potential undervaluation. In contrast, Visteon, trading at USD 90.02, showcases a PE ratio of 10.7x for 2024F, supported by a strong ROE of 20.1%.