Analysts: Expect stronger 2H for Frontken after new high
Frontken Corporation Bhd (Frontken) is expected to record stronger financial performance in the second half of 2021 (2H21) after reaching an all-time high in the second quarter of 2021 (2Q21), analysts say.
Hong Leong Investment Bank Bhd’s research team (HLIB Research) in a report, noted that Frontken’s all-time high 2Q21 core net profit of RM26 million (up 15 per cent q-o-q, up 26 per cent y-o-y) brought 1H21’s total to RM48 million (up 31 per cent).
1H21 one-off adjustments include forex gain (RM7,000), PPE disposal gain (RM22,000), PPE written off (RM3,000) and allowance for impairment losses on receivables (RM283,000).
It pointed out that 2H is a seasonally stronger half for
Frontken (1H20 core profit after tax accounted for 45 per cent of FY20’s).
It said its semiconductor segment generated 85 per cent (2Q20: 87 per cent) of group revenue in 2Q21.
“AGTC has completed the acquisition of a building (Plant 2) situated in the Southern Taiwan Science Park at Kaohsiung City on July 9, 2021.
“It is expected to be operational next year in tandem with the proposed commercial production of the 3nm chips by its key customer in Taiwan.
“Plant 2’s phase 1 capacity utilisation is expected to be full from day 1 based on customer’s projection and will begin Phase 2 expansion immediately,” it added.
Its oil and gas (O&G) segment accounted for the remaining 15 per cent of group turnover in 2Q21.
“It will continue to chase for new works in view of the strong Brent crude oil price recovery. Hence, it is cautiously optimistic that O&G will perform better than last year. Its new Pengerang facility will be completed soon,” HLIB Research said.
All in, the research team retained its ‘buy’ recommendation on the stock.
It said: “We like Frontken for its multi-year growth ahead on the back of sustainable global semiconductor market outlook, robust fab investment, leading edge technology (7nm and below), and strong balance sheet (net cash of RM326 million or 31 sen per share) to supports its Taiwan expansion.”