Frencken Group’s better-than-expected results in 3Q have led analysts to be more optimistic of the company’s prospects ahead.
CGS-CIMB Research has raised its target price to $1.27 from $1.25 previously.
Maybank Kim Eng, too, has increased its target price to $1.39 from $1.33 previously.
DBS Group Research has an even higher target price of $1.51 compared to $1.43 previously.
All three brokerages have maintained their “buy” rating for the equipment service provider.
CGS-CIMB believes that Frencken’s better-than-expected earnings were driven by a shift in sales mix in favour of semiconductor products that offer better margin.
The brokerage also reckons that the improved bottom line was driven by higher operational efficiencies and tighter cost control measures.
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It has raised its FY20-FY22 core earnings per share (EPS) forecasts for the company by 0.92%-4.76%.
“Downside risks are order pullbacks by customers, while upside risks could come from new customer wins and stronger-than-expected sales in the industrial automation segment,” CGS-CIMB analyst William Tng writes in a note dated Nov 12.
DBS says Frencken's strong presence in a wide variety of industries and business segments – such as automotive, analytical & life science, medical, semiconductor and industrial & industrial automation – provides greater resilience and stability.
The brokerage, too, has raised its FY20 and FY21 earnings forecasts for the company by 6-18% on better margins.
“We are optimistic that Frencken can tide over this period of extreme volatility given its diversified exposure,” DBS analyst Ling Lee Keng writes in a Nov 13 report.
Meanwhile, Maybank KE says the varying degrees of upswing of the semiconductor, analytical and automotive segments could sustain earnings momentum for the company.
See: Frencken Group poised for recovery, expects better 2H20 earnings: UOB Kay Hian
“Additionally, we favour Frencken for its revenue diversity and long-term margin expansion potential as it rolls out a breadth of new products with higher value-add with blue-chip customers,” Maybank KE analyst Lai Gene Lih writes in a Nov 12 report.
The brokerage raised its FY20-FY22 EPS forecasts by 4-9% to reflect the company’s strong results.
As at 2.30 pm, Frencken was up 6 cents or 6.2% at $1.03 with 6.8 million shares changed hands.
