This Stock Has Fallen, But Its Earnings Are About To Take Off, Says Maybank

THE CONTEXT

• Frencken Group’s exposure to the AI boom comes through the complex components and modules it supplies to semiconductor equipment makers, which benefit from investment in chip production.

Its opportunities also extend to automotive radar antennas and gearbox solutions for humanoid and service robots, although the robotics business remains at an early stage.

• Recent financial performance has been subdued, with 1H2026 revenue slipping 0.8% to S$427.8 million and net profit falling 3.4% to S$19.3 million.

However, Maybank’s 28 Oct report expects accelerating orders from key semiconductor customers to drive a much stronger second half, followed by record core net profit of S$63 million in 2027.

• The shares have had a bumpy ride: at S$2.12 recently, they were down ~40% from the June 2026 high of ~S$3.50.

Interestingly, Amova Asset Management Asia scooped up 13,096,000 shares during that period, upping its stake from 6.93% to 9.05%.

• Maybank maintains a Buy rating and S$3.32 target price, and sees the potential for several years of growth if AI investment continues.

• Read excerpts of its report below .....

Excerpts from Maybank Research report
Analyst: Jarick Seet

Frencken Group (FRKN SP) -- The ramp-up is likely here

3Q26E likely to be the start of the ramp-up

We believe 3Q26E will show much stronger growth as its key European semicon customer has resumed orders at a much faster pace and its other key semicon client continues to ramp up orders.

FRENCKEN
Share price: $2.14	Target: $3.32

We expect a much stronger 2H26E than 1H26. With a SGD100m war chest raised, we also expect potential acquisitions in 2027.

Maintain BUY and TP of SGD3.32, based on 25x FY27E P/E.

FY (S$ m, unless stated)	FY24A	FY25A	FY26E	FY27E	FY28E
Revenue	794	865	904	1,040	1,196
Core net profit	37	39	45	63	75
Core EPS (cents)	8.7	9.2	9.5	13.3	15.9
Core EPS growth (%)	14.3	5.4	3.7	40.1	19.6
Net DPS (cents)	2.6	2.7	2.9	4.0	4.8
Core P/E	13.0	15.1	22.5	16.1	13.4
P/BV	1.1	1.2	2.0	1.8	1.7
Net dividend yield (%)	2.3	2.0	1.3	1.9	2.2
Consensus net profit (S$m)	—	—	45	51	60
Maybank vs consensus (%)	—	—	(0.3)	23.6	24.7

3Q26E will be the inflection point

We expect its European semicon orders to rebound strongly in 2H26E, as inventories would have been depleted by 1H26.

We expect strong order growth from the deep ultraviolet (DUV) and extreme ultraviolet (EUV segments), especially in 2027, for new products (NPI) which could add SGD50-100m of revenue.

We also expect its other key semicon client to continue its ramp up and Frencken will benefit by doing more modules and components.

We expect higher margins at both the gross and net levels from operating leverage and higher semicon revenue content.

SGD100m war chest for acquisitions

We believe that Frencken is building a war chest that will likely lead to strategic investments and acquisitions, potentially within two years, and it could be multiple acquisitions which could introduce new capabilities or generate more recurring revenue, especially in the tech/semicon space.

We believe this will be a significant positive for Frencken.

Multi-year growth story if AI capex continues

We believe Frencken is a key beneficiary of the recovery in the semiconductor industry.

JarickSeet3.18 Jarick Seet, analystWe expect the ramp-up in 2H26E to potentially offset the weakness in 1H26 and still result in a positive year for Frencken.