Hong Leong Investment Bank Bhd (HLIB) has maintained a BUY call on Frontken Corp Bhd with a revised target price of RM4.50 from RM4.95, implying a 16.8% capital upside from the current price of RM3.85 and an expected total return of 18.1% including a 1.3% dividend yield.
HLIB trimmed the target price following earnings adjustments but said the group’s structural growth story remains intact.
Frontken reported fourth quarter FY25 core net profit of RM40.2 million, down 4% quarter-on-quarter but up 11% year-on-year, bringing full-year core earnings to RM164 million.
This came in at 92% and 94% of HLIB’s and consensus forecasts respectively, with the shortfall mainly attributed to a stronger ringgit that weighed on translated earnings from its key Taiwan subsidiary. Net foreign exchange losses of RM9.8 million were recorded during the year.
For FY25, revenue rose 7% to a record RM608 million, supported by a 17% increase in revenue from its Taiwan unit, or 22% growth in local currency terms, driven by robust semiconductor demand. Core earnings grew 26% year-on-year on higher volumes and effective cost control.
Looking ahead, management expects Taiwan growth in 2026 to exceed the 22% achieved in 2025 in local currency terms, underpinned by migration to leading-edge nodes and firm demand.
HLIB has raised its FY26 revenue growth forecast for the Taiwan business to 26%, although this is offset by forex headwinds and more conservative margin assumptions, resulting in a 6% and 5% reduction in FY26 and FY27 earnings forecasts.
HLIB said Frontken’s strong net cash position of RM812 million will support expansion in Taiwan, Singapore and the United States, while ongoing merger and acquisition discussions could provide additional catalysts.
As of 2.23 pm, Frontken’s stock price increased 0.52% to RM3.87.
