Frencken - RHB Invest 2024-11-21: Semiconductor Sector Recovery Still In Play; BUY

• We remain upbeat on Frencken, as its 3Q24 results are in line with expectations.
• Frencken is a beneficiary of the anticipated semiconductor sector’s recovery in 2025, driven by the latter’s 14% y-o-y revenue growth this year, according to consulting firm Gartner. Also, SEMI expects the 300mm fabrication (fab) equipment market to expand by 24% y-o-y (US$132m) next year, driven by the demand for AI chips and regionalisation of fab plants.
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3Q24 results are in line.

• Frencken's 3Q24 revenue grew 8% y-o-y to S$199m while PATMI expanded by 20% y-o-y to S$9m. Revenue growth was driven by the mechatronics division, whose turnover rose by 11% y-o-y to S$177m. This was offset by the 13% y-o-y decline in its integrated manufacturing services (IMS) division’s revenue to S$21m.
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• The medical segment’s revenue dropped 4% y-o-y to S$30m on slower customer orders in Europe. The IMS unit’s automotive segment saw a 12% y-o-y revenue decline to S$16m. It’s consumer and industrial electronics segment’s revenue also declined by 9% y-o-y to S$5m.
• Gross profit margin was 14% (+1.6ppts from 3Q23 and sequentially lower by 0.7ppts from 2Q24 due to sales mix). PATMI was at S$9m, with a net margin of 5%.

Outlook remains positive.

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Shekhar Jaiswal RHB Securities Research | https://www.rhbgroup.com/ 2024-11-21 SGinvestors.io

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