Simons Trading Research

Author: simonsg   |   Latest post: Fri, 5 Aug 2022, 3:49 PM


Frencken Group - a Year of Equal Halves?

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  • Frencken will report its 1H21 results after market closes on 12 Aug 2021.
  • With the strong demand from the semiconductor industry, Frencken's 2Q21F net profit could grow 62.7% y-o-y.
  • Our target price for Frencken is raised to S$2.34, driven by our earnings upgrade and a higher sector average P/E multiple.

Frencken's 2Q21 Net Profit Could Grow 62.7% Y-o-y

  • Frencken (SGX:E28) will report its 1H21F results after market closes on 12 Aug 2021. Over FY18-20, the first half of the year accounted for 38-42% of the full-year’s core net profit (average: 40%), while the second half accounted for 58-62% (average: 60%).
  • Given the strong performance of the semiconductor industry (23% of 1Q21 revenue), we think FY21F could possibly see a departure from the historical norm, with a 50/50 core net profit split between 1H21F and 2H21F.

ASML (a Key Semicon Customer) Has Raised Sales Guidance

  • According to our European research partner Liberum, ASML Holding’s (ASML NA) initial guidance (in Jan 2021) for its 2021F revenue growth was around 12% to €15.7bn. Post-2Q21 results, ASML raised growth driver.

Raising Our Earnings Expectations

  • According to the Semiconductor Industry Association (SIA), global sales of semiconductors reached also project some margin improvements.

Reiterate ADD on Frencken With Higher Target Price

  • With the current FY22F sector average P/E having risen to 15.3x (previously: 13.5x), our target price for Frencken is raised to S$2.38, driven by the higher P/E peg and our earnings upgrades.
  • Downside risks are supply automation segments.

Source: CGS-CIMB Research - 4 Aug 2021

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Labels: Frencken

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Frencken 1.31 +0.06 (4.80%) 7,681,200 

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