Broker: Maybank Research Pte Ltd
Date of Report: August 17, 2025
Frencken Group: Earnings Outlook Softens for 2H25, But Long-Term Growth Remains Intact
Overview: Frencken Group Faces Challenging 2H25, Yet Maintains Strong Strategic Position
Frencken Group Ltd (FRKN SP), a Singapore-listed technology hardware manufacturer, has released its 1H25 results, reporting a PATMI of SGD19.9 million, which aligns with both internal and consensus expectations. Despite this, the company’s 2H25 guidance has disappointed, prompting Maybank Research to lower its target price to SGD1.60 (from SGD1.75) but maintain a BUY recommendation. The rationale: while near-term earnings may be pressured by sectoral and customer-specific headwinds, the company’s long-term growth story and strategic investments remain robust.
Key Takeaways from 1H25 Results and 2H25 Guidance
1H25 PATMI of SGD19.9 million was in line with expectations.
Management’s guidance for 2H25 is for “stable” performance, which is unusually cautious given the historical seasonal strength of the second half.
Weakness is expected in the analytical life sciences division and among certain European semiconductor customers.
The company has responded by revising down its FY25E/FY26E earnings forecasts by 7.5% and 17.5%, respectively.
The new target price is SGD1.60, based on a forward P/E of 16.3x for FY25/26E.
Share Price and Valuation Snapshot
| Metric |
Value |
| Current Share Price (SGD) |
1.48 |
| New 12M Price Target (SGD) |
1.60 (+12%) |
| Previous Price Target (SGD) |
1.75 |
| 52W High/Low (SGD) |
1.70 / 0.85 |
| Market Capitalisation |
SGD630.6M (USD492M) |
| Issued Shares (m) |
426 |
| Free Float (%) |
59.8 |
Business Profile: Diversified Exposure and Sticky Customer Base
Frencken manufactures complex components and modules for a range of industries including:
- Semiconductor
- Life Sciences
- Automotive
- Industrial Automation
The company is known for high-mix, low-volume, and high-complexity mechatronics. Customer relationships are sticky, driven by decades-long partnerships, complementary competencies, and sometimes sole-sourcing for critical products.
2H25 Weakness: Analytical Life Sciences and European Semi-Con Customers Under Pressure
Management expects analytical life sciences revenue to decline in 2H25.
European semiconductor customers are facing uncertainties due to US export controls and restrictions on semiconductor equipment.
Despite these headwinds, management remains confident in the company’s long-term prospects.
Strategic Expansion: Building for the Future
Construction of a larger facility in Singapore is set to begin, with plans for expanded cleanroom capacity to serve key semiconductor clients.
Frencken will also establish new manufacturing sites in the US, further supporting its global footprint.
Financial Forecast Revisions
Maybank has lowered its revenue and earnings estimates for FY25E, FY26E, and FY27E due to the revised outlook.
| Metric |
FY25E (New) |
FY25E (Old) |
Chg (%) |
FY26E (New) |
FY26E (Old) |
Chg (%) |
FY27E (New) |
FY27E (Old) |
Chg (%) |
| Revenue (SGDm) |
834.0 |
873.8 |
-4.5 |
917.5 |
1,004.8 |
-8.7 |
1,009.2 |
1,155.6 |
-12.7 |
| Core Net Profit (SGDm) |
39.7 |
42.9 |
-7.5 |
44.9 |
54.4 |
-17.5 |
55.0 |
67.4 |
-18.4 |
| EPS (SGD) |
0.09 |
0.10 |
-7.5 |
0.11 |
0.13 |
-17.5 |
0.13 |
0.16 |
-18.4 |
Key Financial Metrics and Peer Comparison
Frencken’s core net profit is expected to grow from SGD32.5 million in FY23A to SGD55.0 million in FY27E.
Net cash position is maintained throughout the forecast period.
Historical dividend payout ratio is around 30% of earnings, expected to continue.
Discounted valuation relative to local peers presents an attractive entry point for investors.
| Key Metrics |
FY23A |
FY24A |
FY25E |
FY26E |
FY27E |
| Revenue (SGDm) |
742.9 |
794.3 |
834.0 |
917.5 |
1,009.2 |
| EBITDA (SGDm) |
80.3 |
91.3 |
85.2 |
93.3 |
107.2 |
| Core Net Profit (SGDm) |
32.5 |
37.1 |
39.7 |
44.9 |
55.0 |
| Core EPS (SGD) |
0.076 |
0.087 |
0.093 |
0.105 |
0.129 |
| Net Dividend Yield (%) |
1.7 |
2.3 |
1.9 |
2.1 |
2.6 |
| ROAE (%) |
8.2 |
8.9 |
8.9 |
9.4 |
10.7 |
| Net Gearing (%) |
Net cash |
Net cash |
Net cash |
Net cash |
Net cash |
Business Model, ESG, and Risk Profile
Frencken’s supply chain exposure introduces environmental, workplace safety, and conflict of interest risks.
No environmental fines or sanctions have been reported in recent years.
The company’s “FrenckenSustainLife” (FSL) program underpins its ESG strategy, with a focus on ethical, sustainable, and profitable growth.
The board is majority independent (67%), but all directors are male.
Employee health and safety is a clear priority; injury rate was 0% in 2021.
ESG score is 41 (below average vs. peer average of 50), mainly due to a need for improved quantitative disclosure on GHG emissions.
ESG Metrics and Initiatives
| Parameter |
2019 |
2020 |
2021 |
| % of Women in Workforce |
34% |
31.82% |
32% |
| MD/CEO Salary as % of Net Profit |
4.72 |
6.44 |
2.98 |
| Independent Directors on Board (%) |
75 |
75 |
75 |
Key ESG Initiatives:
- Introduction of solar energy panels at factories in China, Malaysia, and Thailand.
- Reuse of cartons and plastic pallets to reduce waste for new shipments.
- No current use of carbon offsets or net zero target, but ongoing focus on resource efficiency.
- Board and management compensation incorporates ESG targets.
Investment Rationale: Why Frencken Remains a Top Pick in Singapore Tech
Frencken is leveraged to the recovery of the semiconductor industry and remains a key beneficiary as demand rebounds.
Its diversified exposure to multiple end markets provides resilience.
Discount to local peers remains compelling for investors seeking undervalued SG tech stocks.
Expansion in Singapore and the US positions Frencken for long-term growth.
Risks to Watch
Prolonged weakness in analytical life sciences and further export restrictions on European semi-con customers.
Any unexpected drop in demand or supply chain disruptions.
Lower-than-expected dividend payout or margin compression.
Conclusion: Long-Term Prospects Outweigh Near-Term Headwinds
While Frencken Group faces a less upbeat 2H25, particularly in its analytical life sciences and European semiconductor customer base, the company’s strong balance sheet, sticky customer relationships, and ongoing strategic investments in manufacturing capacity keep its long-term growth story alive. Maybank Research maintains its BUY rating, underscoring Frencken’s unique position as a Singapore tech sector leader poised to benefit from the eventual recovery in global semiconductor demand.
