RHB Group research analyst Jarick Seet believes Frencken Group will "continue to book robust numbers” for the year ahead, driven by the performance of both its semiconductor and medical divisions.
“There is room for its share price to grow, as its peers are trading at higher valuations,” he adds in a Dec 28 research note.
Seet views that Frencken’s semiconductor revenue growth will likely continue in 2022, following its 3QFY2021 ended September sales which saw strong y-o-y growth of 42.7%, 21.8% and 29% for the semiconductor, medical and analytical industries respectively.
While headwinds to the industrial automation and automotive companies - which saw sales decrease by 17% y-o-y and 5.6% y-o-y respectively - are expected to continues for the next two quarters, Seet is optimistic that the semiconductor sector will continue to be bullish until 1HFY2022.
Seet also sees Frencken’s aerospace segment following the acquisition of Avimac as a potential growth driver. Noting that Avimac is managed by a highly experienced team, he points out that the company serves major players in the sector.
“This acquisition will open a pathway for Frencken to access new technologies, and potentially build a new business pillar in the aerospace industry. In addition, the acquisition of Avimac could be a springboard for Frencken to penetrate the commercial aerospace engineering industry – given the former’s established customer base, certified manufacturing facilities, and forthcoming programmes,” he explains.
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Overall, Seet remains positive on Frencken’s long-term prospects and its management team, which he says justifies his “buy” call for the counter.
His target price for Frencken remains unchanged at $2.64, which is pegged to a FY2022 P/E ratio of 16 times.
As at 9.56am, Frencken shares are up 6 cents or 3.23% higher at $1.92.
