While Frencken Group’s industrial automation division is likely to stay muted this year, RHB Securities believes investors should continue to pick up the stock.

This is because the company’s semiconductor division is expected to see strong double-digit growth this year.

And by next year, the brokerage reckons that both its divisions should drive earnings upwards.

RHB has maintained its “buy” rating for the stock with an unchanged target price of $1.16.

According to the brokerage, Frencken’s key customer in industrial automation has delayed its new product launch, due to supply chain issues.

It believes the launch will likely only happen in FY21.

“As a result, we expect this segment to continue to take a hit, and only see recovery in FY21,” RHB analyst Jarick Seet writes in a note dated Oct 15.

In the meantime, Frencken’s semiconductor division should benefit from the uplift in the chip industry, says RHB.

It notes that management has guided for higher revenue in 2H20, due to a pick-up in orders from customers in Asia and Europe.

Moreover, the initial supply chain disruptions caused by the COVID-19 lockdown measures have largely been resolved, adds RHB.

As at 11.40 am, Frencken was down 3 cents or 2.8% at $1.04 with 2.5 million shares changed hands.