Brokers' take: CGS-CIMB raises target price for Frencken ahead of H1 results

CGS-CIMB is raising its target price for mainboard-listed technology solutions provider Frencken Group to S$2.34, up 25.1 per cent from S$1.87 previously, on the back of strong demand from the semiconductor industry.

The research house is keeping its "add" recommendation on the counter.

The higher target price comes ahead of Frencken's H1 results, which is expected to be released on Aug 12.

In a report on Wednesday, analyst William Tng said the research house is "incorporating higher semicon sales contribution to Frencken's group revenue" and raising its revenue forecast for FY2021 to FY2023 by between 3.8 and 4.5 per cent.

"With better economies of scale, we also project some margin improvements," he said.

Mr Tng noted that, from FY2018 to FY2020, the first-half typically accounted for an average of 40 per cent of the group's full-year core net profit, with the bulk of core earnings coming in the second half.

"(However), given the strong performance of the semiconductor industry, we think FY2021 could possibly see a departure from the historical norm, with a 50:50 core net profit split between H1 and H2 2021," he said.

"(The Semiconductor Industry Association) also expects the demand for semiconductors to continue to rise substantially in the long term, as the world continues using chips to become smarter, greener, more productive and better connected," Mr Tng added.

Shares of Frencken are trading 14.1 per cent or S$0.27 higher at S$2.18 as at 1.56pm.