Maybank IB maintains earnings outlook on Frontken

KUALA LUMPUR: With recent quarterly earnings coming in below estimates, Maybank Investment Bank research has maintained its earnings outlook on Frontken Corp Bhd on its view that the current valuations have largely priced in near-term upsides in the semiconductor segment.

''Our FY21-22E earnings are intact – primarily underpinned by the continuation of favourable earnings growth of the semiconductor segment which would partly offset the softer O&G segment,'' it said in a note.

Frontken's 3Q20 core net profit was RM19.8mil, which brought 9M20 earnings to RM57.1mil, or 12% higher year-on-year.
It said the higher earnings were mainly owing to the volume pick-up in the semiconductor segment due to higher demand and stronger order from its key Taiwanese customer.

This was partially offset by the weaker oil and gas segment, which affected revenue and margins, as well as the marginally higher tax rate.

Maybank IB, which has a ''hold'' recommendation on Frontken, lowered its FY20 earnings forecast by 9% to factor in the softer oil and gas segment's earnings due to prolonged weakness in the industry.

However, the research house maintained its target price of RM3.60, pegged to an unchanged 37x FY21 forecast price-earnings at about plus-2 standard deviation of mean due to Frontken's earnings resilience.


04 Nov 2020