Frencken Group - UOB Kay Hian 2022-11-30: 3Q22 Impacted By Cost Pressures, Weaker Currency & Inventory Write-Down

• Frencken's 3Q22 earnings of S$11m (-26% y-o-y/-17% q-o-q) was below expectations, 9M22 formed 66% of our full-year estimate. 3Q22 revenue fell 1% y-o-y, with semiconductor (+16% y-o-y), life science (+8% y-o-y) and medical (+3% y-o-y) recording growth while industrial automation (-35% y-o-y) and automotive (-7% y-o-y) declined.
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• We cut our 2022 and 2023 EPS forecast for Frencken by 16%. Downgrade Frencken to HOLD.

Flattish revenue in 3Q22 with mixed performance across different segments.

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• 3Q22 revenue of S$195m (-0.6% y-o-y/+2.5% q-o-q) was led by growth from the semiconductor (+16% y-o-y), life science (+8% y-o-y) and medical (+3% y-o-y) sectors.
• Growth in the semiconductor space was lifted by higher orders for front-end semiconductor equipment from customers in Europe and Asia. However, sales in the industrial automation (-35% y-o-y) and automotive (-7% y-o-y) sectors were impacted by reduced customer demand and bottlenecks in the global supply chain.

Cost pressures expected to ease in 2H22.

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John Cheong UOB Kay Hian Research | https://research.uobkayhian.com/ 2022-11-30 SGinvestors.io

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