Expecting hoh revenue growth in FY22F
? FY21 net profit was in line with our/Bloomberg consensus full-year expectations, at 97% of full-year forecasts.
? Management guided that Frencken should see a moderate increase in its revenue in 1H22F versus 2H21.
? Reiterate Add. It announced a higher 4.31 Scts DPS for FY21 (FY20: 3.00 Scts).
FY21performance in line with expectations
FY21 revenue grew 23.6% yoy to S$767.1m. This was in line with our expectations at 102% of our full-year forecast and above Bloomberg consensus expectations at 106%. Net profit in FY21 grew 38.0% yoy to S$58.7m and w as in line with our/Bloomberg consensus full-year expectations at 97% of full-year forecasts. Excluding an impairment loss of S$6.2m in FY20, adjusted net profit rose 20.4% in FY21.
Frencken guided for hoh revenue growth in 1H22F
For 1H22F, Frencken expects a moderate increase in its revenue hoh with the revenue guidance for its various segments as follow s: a) the semiconductor segment is expected to post higher revenue; b) the medical segment is expected to register stable revenue; c) the analytical & life sciences segment is expected to register stable revenue; d) the industrial automation segment’s revenue is anticipated to increase; and e) the automotive segment is expected to record higher revenue.
Growth strategy
Frencken has been ramping up its output capability and increasing production space with new facilities in Europe, Malaysia and Singapore. In its mechatronics division, Frencken aims to expand its wallet share with customers and move up the value chain. The recent acquisition of Avimac Pte Ltd (Unlisted) in Sep 21 expanded the division’s production capacity and capability to support customers’ new programmes as well as provided access to new technologies and competencies. This acquisition also helps Frencken gain
exposure to the commercial aerospace industry. The IMS division is implementing programmes to enhance its operations and has secured its first automotive radar antenna programme using its proprietary plastic metallisation process. Frencken expects its automotive segment to benefit from more such programmes in the future.
Reiterate Add
Given cost pressures, w e have assumed higher operating expenses and reduced our FY22-23F EPS by 2.04-3.25%. Keeping our 10% premium to the CY23F sector average P/E multiple of 10.60x (given Frencken’s FY21-24F EPS CAGR of 16.5%) our new P/E multiple is 11.66x, translating into a slightly low er TP of S$2.06. Previously our target P/E multiple w as 11.44x, based on a 10% premium to the CY23F sector average P/E multiple of 10.40x on 28 Jan 2022. Key risks are potential production disruptions arising from Covid19 infections in its workforce and further cost pressures from higher raw material costs.