Frencken - RHB Invest 2024-05-16: Expect Revenue Traction To Improve; Keep BUY

• We maintain our positive stance on Frencken (SGX:E28) as 1Q24 revenue and earnings met our expectations. We believe Frencken is a beneficiary of the anticipated semiconductor recovery going forward and expect revenue to continue strengthening, as its key European customer expands into Asia and builds up inventory for the next ramp-up across a number of systems.
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1Q24 in line.

• Frencken's 1Q24 revenue grew 12.2% y-o-y to S$194m while earnings surged 73% y-o-y to S$9m on the back of stronger topline and gross margins.
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Semiconductor segment revenue backed by robust sales to key European customer

• The stronger mechatronics division’s revenue was led by the semiconductor segment (+37.4%; S$79.5m), which was backed by robust sales to its key European customer and modest sales growth from its Asia operations.
• Growth in the medical (+8.6% y-o-y; S$32.7m) and analytical & life science (+16.7% y-o-y; S$46.6m) segments was offset by the industrial automation unit (-49.5% y-o-y; S$9.4m).
• The IMS division’s automotive segment’s revenue decline (-6.6% y-o-y; S$16.7m) was mitigated by the consumer and industrial electronics business’ revenue growth (+29.5% y-o-y; S$4.8m).
• Gross margin rose by 1.4ppts to 13.7% from better operating leverage.

Growth to be led by semiconductor segment.

• Read more at SGinvestors.io.

Alfie Yeo RHB Securities Research | https://www.rhbgroup.com/ 2024-05-16 SGinvestors.io

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