MAYBANK Research has upgraded its call for Frencken Group : E28 0% from “sell” to “buy” on Wednesday (Jan 25), stating that the “worst is over”. 

New orders secured in the medical, analytical, life sciences, and semiconductor segment, as well as recovery in margins, are expected to help drive the group’s growth in FY2023, senior analyst Jarick Seet said.

The research house also expects the integrated technology solutions provider to introduce products with greater value-add which will in turn drive margins further.

Seet increased FY2023-FY2024 core net profit forecasts for the integrated technology solutions provider by 11.7 per cent and 12.9 per cent respectively to S$57.7 million and S$59.9 million, and raised the target price to S$1.21 from S$1.02. 

This comes as Frencken’s largest semiconductor customer ASML reported strong fourth-quarter results, with expectations of a 25 per cent year-on-year net sales growth for FY2023. 

While ASML’s customers expect the market to rebound in the second half of FY2023, Seet noted that there is still strong demand for ASML’s systems due to long order lead times and the strategic nature of lithography investments. 

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This positive sign for Frencken’s semiconductor segment is projected to further boost the group’s growth in FY2023.

Frencken is also expected to benefit from the drop in electricity prices. Seet noted that the group’s margins are also projected to recover in subsequent quarters since the cost increases have been passed on to customers.

“Over the medium term, we expect earnings to be driven by revenue growth and margin optimisation through new products and improving efficiencies,” Seet added.

Shares for Frencken Group rose 7.6 per cent or S$0.08 to S$1.13 as at 10.58 am on Thursday.