Analysts are looking forward to a better second half for Frencken Group, as the company guided that the worst of the semiconductor down cycle is over, even as it reported a 53.8% y-o-y drop in its 1HFY2023 ended June earnings to $12.1 million.
In his Aug 18 report, William Tng of CGS-CIMB notes that the numbers were better than his expectations and that more importantly, Frencken's 2QFY2023 was already showing signs of improvement, with earnings up 27.7% q-o-q and revenue up 3.5% in the same period.
"Although inflationary cost pressures persist, we think Frencken should continue to be diligent in cost management and, hence, our lower operating expense assumptions lead to 2.8-12.7% increases in our FY2023 to FY2025 net profit forecasts," says Tng, who has upgraded his call from "hold" to "add" along with a higher target price of $1.10 from 87 cents previously.
Maybank Securities' Jarick Seet expects Frencken to benefit as increased orders from its key customer should ramp up utilisation and allow it to enjoy the operating leverage it had in FY2022.
"While Frencken is still focusing on its investments in programmes for existing and new customers, we believe it will be well-positioned to capitalise on semi-con demand recovery, especially in FY2024E," says Seet, who has indicated a "buy" call and 95 cents target price on the stock in his Aug 14 note.
As at June 30, the company's net asset value per share was 90 cents - not far from its current share price.
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Seet believes that Frencken is well-positioned to take advantage of a rebound in demand and that it is seen to "gradually improve in subsequent quarters".
DBS Group Research, meanwhile, prefers to stay guarded on this stock, as it maintains its "hold" call and 78 cents price target.
DBS notes that Frencken's margins remain weak, no thanks to inflationary pressures, higher depreciation costs and hefty capex.
Frencken Group changed hands at 98 cents on Aug 21, unchanged for the day.
