Jeffrey Tan  Published on Wednesday, Jul 01, 2020 / 12:00 PM SST (GMT+8) / Updated 4 hours ago

SINGAPORE (July 1): Amid the novel coronavirus (Covid-19) pandemic and expectations of higher global fabrication equipment spending, Frencken Group&rsquo s diversified revenue streams should bode well for the company, according to DBS Group Research.

  This should provide &ldquo resilience&rdquo and &ldquo stability&rdquo to the equipment service provider, the brokerage adds.

  According to DBS, about 19% of the company&rsquo s revenue is derived from the medical segment, which is an added advantage during the pandemic.

  About 20% of the company&rsquo s revenue is derived from the semiconductor segment, which is expected to far better than others in the technology value chain, it adds.

  The brokerage notes that industry association SEMI has forecast global fabrication equipment spending to jump 24% y-o-y in 2021. This is 10 percentage points higher than its previous forecast in 1Q20.

  DBS points out that May&rsquo s semiconductor equipment billing data was up 14% y-o-y, its eighth consecutive y-o-y increase since October last year.

 

  The brokerage has maintained its &ldquo buy&rdquo call for the stock with a higher target price of $1.02 from 92 cents previously.

  It also notes that the stock is relatively cheap as it is trading at about a 30% discount to its peers&rsquo average of 13 times earnings.

  &ldquo We are optimistic that Frencken can tide over this period of extreme volatility given its diversified exposure,&rdquo DBS analyst Ling Lee King writes in a note dated June 30.

  As at 11.55 am, Frencken was up 4.5 cents or 5.1% at 92.5 cents with 4.9 million shares changed hands.