Frencken is slated to report 4Q23 results on 27 Feb 2024 after trading hours, Maybank IB said it expects 4Q23 to show gradual improvement QoQ with FY23 revenues at SGD723m and NPAT at SGD25m. However, it’s key customer Applied Materials (AMAT) just reported a stellar 1Q24 result and lifted its 2Q24E earnings outlook. The house said it now expects inventory levels to be drawn down at a faster pace. In addition, Frencken subsidiary ETLA is one of the 12 suppliers globally that won AMAT’s best in class performance award for
Maybank believes Frencken will be a key beneficiary of AMAT’s production shift to Southeast Asia (SEA) via new projects and volumes. It remains bullish on the company in this semi-con recovery and lift TP to SGD1.61.
The company’s key semi-con customer AMAT which contributes to 30-35% of their whole semi-con segment reported 1Q24 results on 16 Feb 2024 and lifted 2Q24 top line and adjusted EPS guidance. The house now believes AMAT’s inventory levels will be drawn down, raising the probability of more orders for Frencken. Another key customer in Europe is also trying to move some production to Malaysia. Maybank believes this will further benefit Frencken which is assisting in the move. Automotive segment is also expected to pick up strongly in the next few years with new product innovations (NPI)
in the electric vehicle (EV) space. Frencken’s utilisation has been around 50-55% for its SEA factories in 2023 and we expect this to rise to 60-65% in FY24 on increased auto and semi-con segment demand.
The house believes that Frencken is in a positive place as a supplier for AMAT as subsidiary ETLA is one of the 12 suppliers globally that won AMAT’s best in class performance award for 2023. Maybank believes this shows the good working relationship they have as well as being a testament to the quality and consistency of Frencken’s capabilities.
Top Pick across SG tech sector
Maybank said it continues to like Frencken and believe it will remain a key beneficiary of the semi-con recovery despite its share price having picked up in the past few months. It remains a TOP pick in the SG tech sector.
