Frencken’s full-year net profit was “slightly above” Tng’s estimates while its revenue stood 4% above his forecasts.
That said, the analyst notes that the stock has re-rated and has already priced in market optimism of a semiconductor recovery in 2HFY2026. As at Feb 5, shares in Frencken are up some 42.96% to $2.03 as at March 5’s close. The share price also represents a one-year gain of 87.96%.
“To factor in renewed optimism in its semiconductor business and support from Singapore’s Equity Market Development Programme (EQDP), we raise our valuation basis to 18 times FY2027 P/E (2 standard deviations or s.d. above its five-year average versus 1 s.d. above its five-year average of 15 times previously, given the then-muted outlook for its semicon business,” says Tng. The analyst’s new target price following the new valuation multiple is now at $2.09 from $1.72.
In addition to his higher target price, Tng has lifted his revenue forecast for FY2026 to FY2027 by 3.4% as it foresees a better outlook for Frencken’s semicon business. The group is also expected to report a higher y-o-y net profit for the 1HFY2026, as guided by management. The team also shared that it expects order flows from its key semicon customer in Europe to resume in 2HFY2026 when its inventory reduction cycle is completed.
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The group also believes its automotive business is “on the cusp” of an inflection point in FY2026 as its products gain further traction.
With the higher revenue forecasts, Tng also expects Frencken’s net profit for FY2026 to FY2027 to grow by 1.4% to 8.3%.
However, the group may also see higher one-off costs in the year due to the restructuring of its automotive business as it consolidates its plants at Sungai Buloh and Johor. The group may also see higher costs from its multi-phase plan to reorganise and build a more efficient structure to support its future growth. The first stage of the group-wide system upgrades and integration will begin in 2026.
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Among Frencken’s peers, Tng prefers UMS Integration for its clearer earnings outlook. The analyst has an “add” call and a target price of $1.88 for the stock.
Shares in Frencken closed 2 cents higher or 1% up at $2.03 on March 5.
