ANALYSTS have raised their target prices on Frencken Group and maintained their “buy” recommendations after the group’s second-half results for 2023 beat expectations.
On Tuesday (Feb 27), the semiconductor manufacturer posted a 20.7 per cent decrease in its net profit for the half year ended Dec 31, 2023 to S$20.4 million. Revenue was down 1.3 per cent to S$391.8 million from S$397.2 million in the year-ago period.
The group’s fourth-quarter net profit of S$13.3 million was “significantly” higher than Maybank and consensus estimates of about S$7 million to S$8 million, said Maybank in a report dated Feb 28.
For RHB, a stronger result led to FY2023 earnings outperforming its estimates by 18 per cent on recovering semiconductor orders and outlook. It also noted that the increase in key semiconductor customer orders helped drive the segment’s growth.
“This leads us to believe that an earnings recovery is underway and a more pronounced recovery will take place from FY2024,” said RHB analyst Alfie Yeo.
RHB has raised its earnings estimates for FY2024 by 9 to 11 per cent and raised its target price on the counter by 24.1 per cent to S$1.80 from S$1.45.
Shares of Frencken were trading 1.9 per cent or S$0.03 higher at S$1.630 as at 3.42 pm on Friday.
Maybank, meanwhile, has raised its target on Frencken by 9.9 per cent to S$1.77 from S$1.61. It also raised its net profit projections by 2 per cent for FY2024 and 2.2 per cent for FY2025.
Frencken remains a top pick across the Singapore technology sector for the research team, as it believes Frencken remains a key beneficiary of semiconductor recovery.
“If the semiconductor recovery ramps up in H2 2024, we believe Frencken will be a key beneficiary and profitability could even surge beyond our bullish forecast,” said Maybank analyst Jarick Seet.
Separately, DBS Group Research has maintained its target price of S$1.90 on Frencken, pegged to a higher price-to-earnings ratio of 17 times, near 1.5 standard deviations above the group’s four-year average.
It now assumes slightly higher net margins for the group, up 5.7 per cent for FY2024 and 6 per cent higher for FY2025, from a previous estimate of 5.5 per cent and 5.9 per cent, respectively. DBS believes net margin to recover after reaching a trough of 3 per cent in the first quarter of 2023.
Like Maybank, DBS expects the semiconductor industry to register strong growth in 2024 and 2025, following a weak 2023.
