- RE-ITERATE BUY Entry – 1.55 Target – 1.80 Stop Loss – 1.45
- FRKN is a technology manufacturer providing end-to-end solutions to global clients including ASML (semiconductor), Philips (medical), Siemens (medical), FEI (analytical), Seagate (industrial automation) and ThermoFisher (analytical).
- Share price correction overdone. Shares of FRKN have dropped around 40% since peaking at S$2.52 in mid-September. We think the selling is overdone. While we acknowledge one key reason for FRKN’s share price weakness is due to margin pressure due to higher freight and component costs, we expect the pressure to ease as the company adjusts towards higher value added projects heading into 2022.
- Positive surprise from Seagate. Last week, Seagate, Frencken’s key industrial automation client, reported a better-than-expected quarterly profit and provided revenue and earnings forecasts that were expected to grow in 2022. Seagate’s CEO believes that hard-disk drives will remain a critical enabling technology as data management continues to grow.
- Consensus estimates are positive. There are 5 BUYS and an average TP of S$2.38, implying a 49% potential upside. Valuations are now cheap at 11x and 10x FY2021 and FY2022 EPS, a 33% discount to SG-listed technology manufacturing peers.
Peer comparison of Singapore-listed technology manufacturers
