- We expect Frencken (SGX:E28) to issue its 3Q23 business update by after the market close on 27 Nov 2023. In our view, 3Q23F revenue likely fell by 9.5% y-o-y to S$176.8m, while net profit likely dropped by 45.1% y-o-y to S$6.0m.
Previously guided that 2H23F revenue could be similar to 1H23’s
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- For 2H23F, Frencken has provided the following guidance for its segmental revenue:
- semiconductor segment to see higher revenue h-o-h;
- medical segment to register stable revenue h-o-h;
- analytical & life sciences segment revenue to increase h-o-h;
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- automotive segment revenue to stay stable h-o-h.
There are production outsourcing opportunities from Europe into Malaysia, in our view
- Going into FY24-25F, we think Frencken’s customers’ inventories have been depleted and the company can expect more firm orders from these customers.
- In our view, compared to 1H23 when customers were not willing to accept components from Frencken due to their excess inventory situation, Frencken is now able to ship the components it is producing to customers.
- The Netherlands accounted for 27.2% of Frencken’s FY22 revenue. In our view, given the higher production costs in Europe and the difficulty in hiring workers, Frencken could benefit from production outsourcing opportunities from Europe into Malaysia.
Reiterate ADD with higher S$1.37 target price on rollover
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