Broker: UOB Kay Hian
Date of Report: 5 August 2025

Frencken Group: Riding the Semiconductor Wave with Robust Growth and Strategic Resilience

Overview: Frencken Group’s Strategic Positioning in Global Technology

Frencken Group Ltd, a global integrated technology solutions company, operates across the automotive, healthcare, industrial, analytical & life sciences, and semiconductor sectors. The company’s recent share price of S\$1.67 reflects strong momentum, supported by a revised target price of S\$2.08—representing a potential upside of 24.6%. This upward revision in target price comes amid a positive outlook in the semiconductor industry, making Frencken an increasingly attractive proposition for investors.

Key Financial Highlights and Performance Metrics

• Market Capitalization: S\$713.2 million (US\$553.7 million)
• Shares Outstanding: 427.1 million
• 52-Week High/Low: S\$1.72 / S\$0.825
• Major Shareholder: Dato’ Gooi Soon Chai (23.7%)
• FY25 NAV/Share: S\$1.09
• FY25 Net Cash/Share: S\$0.25

Price Performance

• 1-Month: +32.5%
• 3-Month: +65.3%
• 6-Month: +47.8%
• 1-Year: +33.6%
• Year-to-Date: +47.8%

Semiconductor Sector: Positive Catalysts Fuel Robust Growth

Frencken is capitalizing on several positive developments in the semiconductor industry, including:

• The US has permitted Nvidia to sell its H20 AI chips to China, easing previous restrictions.
• TSMC (Taiwan Semiconductor Manufacturing Company) reported a remarkable 61% year-over-year earnings increase for Q2 2025 and forecasts a 30% revenue growth for 2025, driven by AI and advanced technology demand.
• Samsung secured a US\$16.5 billion chip supply deal with Tesla, further signaling robust industry demand.

Frencken’s key semiconductor customers are also performing well:

• ASML’s Q2 2025 earnings and net bookings exceeded expectations, with EUR7.7 billion in sales and EUR2.3 billion in earnings.
• Applied Materials achieved 7% year-over-year revenue growth and 24% net income growth, citing strong demand for energy-efficient AI computing.

Segment Performance and Earnings Outlook

Frencken expects to report Q2 2025 earnings of S\$10 million (+10% year-over-year), underpinned by:

• Growth in semiconductor and medical segment revenue
• Stable performance in analytical life sciences and industrial automation
• A slight decline in automotive revenue
• Gross margin expansion from an improved product mix

Revenue by Segment (2021-2025)

Frencken has maintained a cautiously optimistic stance, projecting moderate revenue growth in 1H25 compared to 2H24. The resilience across varied end-markets and a diversified revenue base ensures stability even amidst sectoral shifts.

Financial Tables: Frencken Group Key Metrics

Strategic Resilience: Navigating Tariff and Supply Chain Risks

Frencken remains largely insulated from US tariffs, with only 9% of revenue attributable to US shipments (mostly from Singapore). The company’s global reach and local-for-local manufacturing strategy enables swift adaptation to trade shifts and supply chain disruptions. To further mitigate risks, Frencken is actively pursuing cost pass-through mechanisms and supply chain adjustments.

Valuation and Recommendations

• Recommendation: BUY (Maintained)
• Target Price: S\$2.08 (49% increase, pegged to 21x 2026F PE at +2SD above mean PE)
• Valuation Rationale: The upward revision in the PE peg reflects Frencken’s superior performance, diversified manufacturing footprint, and robust positioning to benefit from the semiconductor cycle recovery.
• Share Price Catalysts: Higher-than-expected factory utilization and effective cost management could drive further upside.

Peer Comparison: Frencken’s Competitive Standing

Profit & Loss, Balance Sheet, and Cash Flow Overview

Profit & Loss (S\$m)

• 2024 Net Turnover: 794.3 | EBITDA: 74.2 | Net Profit: 37.1
• 2025F Net Turnover: 818.6 | EBITDA: 77.6 | Net Profit: 39.8
• 2026F Net Turnover: 861.7 | EBITDA: 82.6 | Net Profit: 42.2
• 2027F Net Turnover: 907.4 | EBITDA: 87.7 | Net Profit: 44.6

Balance Sheet (S\$m)

• 2024 Total Assets: 735.1 | Total Liabilities & Equity: 735.1
• 2025F Total Assets: 796.9 | Total Liabilities & Equity: 796.9
• 2026F Total Assets: 848.1 | Total Liabilities & Equity: 848.1
• 2027F Total Assets: 890.6 | Total Liabilities & Equity: 890.6

Cash Flow (S\$m)

• 2024 Operating Cash Flow: 48.0 | Investing: (11.1) | Financing: (15.6)
• 2025F Operating Cash Flow: 74.9 | Investing: (30.9) | Financing: (11.0)
• 2026F Operating Cash Flow: 63.4 | Investing: (38.8) | Financing: (13.3)
• 2027F Operating Cash Flow: 69.2 | Investing: (38.7) | Financing: (14.0)

Key Metrics and Growth Outlook

• EBITDA Margin: 9.3%-9.7% (2024-2027F)
• Net Margin: 4.7%-4.9%
• ROE: 8.7%-8.9%
• Debt to Equity: 20.0%-20.2%
• Net Debt/(Cash) to Equity: (16.7)% to (30.4)%

Growth remains steady, with turnover increasing by 3.1%-6.9% annually and net profit growth ranging from 5.6%-14.3% across the forecast period.

Conclusion: Frencken Group Positioned for Sustainable Growth

Frencken Group stands out as a resilient and innovative technology player, well-positioned to benefit from the semiconductor sector’s recovery and global supply chain diversification. The company’s diversified revenue streams, strong financials, prudent risk management strategies, and local-for-local manufacturing capabilities set the stage for continued growth. With a robust outlook, a 49% higher target price, and a strong buy rating, Frencken is a compelling investment opportunity for those seeking exposure to the global technology value chain.