Brokers’ take: CGS-CIMB upgrades Frencken to ‘add’ on recovery prospects
Goh Ruoxue
CGS-CIMB has upgraded its call for Frencken Group to “add” from “hold”, noting that the semiconductor and machine manufacturer is seeing signs of recovery among its semiconductor customers.
In its Friday (Aug 18) report, the research house also raised its target price to S$1.10 from S$0.87, pegging it to a price-to-earnings ratio of 12.2 times based on its current five-year average estimates.
The new target price comes in the wake of updated earnings per share (EPS) forecasts for FY2023 to FY2025, with the brokerage foreseeing a potential resumption in double-digit core EPS growth in FY2024 and FY2025.
Analyst William Tng remains cautious on the strength of demand recovery, dimming his revenue forecasts for FY2023 to FY2025.
Nonetheless, Tng noted that Frencken’s latest set of results exceeded CGS-CIMB’s expectations with better quarter-on-quarter performance in Q2.
He also highlighted how the group’s management is expecting stable revenue in the second half despite a cautious full-year outlook.
Said the CGS-CIMB analyst: “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 [increases] in our FY2023 to FY2025 net profit forecasts.”
The brokerage projected Frencken’s FY2023 net profit to come in at S$24.2 million, before eventually growing to S$38.4 million and S$47.8 million, respectively, in the subsequent financial years.
Frencken shares remained flat at S$0.98 as at 10.29am on Monday.
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