SINGAPORE (July 13): Despite the Covid-19 pandemic and US-China rivalry rattling markets in recent months, Maybank Kim Eng (MKE) analyst Gene Lih Lai has initiated a “buy” call on the technology hardware manufacturer, Frencken. Quality growth and its relative insulation against geoeconomic conflicts, he says, are likely to make it a good prospect for investors.
“Our “buy” on Frencken is premised upon exposure to structurally growing markets through blue-chip customers; earnings resilience despite a challenging business environment due to Covid-19 and US-China trade tensions; and track record of margin improvement with room for more,” Lai comments in a MKE broker’s report dated July 12. He has given the counter a $1.20 12-month price target with a 34% upside.
Frencken manufactures components and modules for a wide range of growth industries including 5G and artificial intelligence (AI), as well as wellness and population ageing. In mechatronics, which consists of 82% of its revenues, Frencken serves established market leaders like ASML, Seagate, Thermo Fisher and Phillips, with its products critical to their operations. Frencken is also often the sole supplier of these components -- which are subject to demanding requirements -- and has a reputation for reliable service among its customers.