Bright prospects for FRONTKN (0128) FRONTKEN CORP BHD on steady order flow
PETALING JAYA: The growth prospects for Frontken Corp Bhd looks bright owing to resilient job order flows and its expansion in Taiwan.
The company is targeting to complete the purchase of its new Taiwanese facility soon, followed by renovation and modification works in the coming months.
It is planning for the new plant’s full operations to go in tandem with the commercial production of the 3-nanometre (nm) advanced chips by its key customer.
At this juncture, this is expected to take place around mid-2022. (nm means the smallest spacing between repeated features on a chip along one direction.)
Frontken specialises in engineering and precision cleaning services, mostly for semiconductor and oil and gas markets in Taiwan, Singapore and Malaysia.
Maybank IB Research said it remains positive on this expansion plan as it could potentially double the company’s output in Taiwan in the long term.
The research house has not factored in significant earnings impact from the upcoming plant in its financial year 2022-2023 forecasts.
“We expect the near-term outlook to remain bright for Frontken due to the global semiconductor industry’s upcycle, which leads to an increase in equipment spending.
“The company also has most front-end semiconductor companies as its customers (within their operating countries), ” the research house noted.
Meanwhile, global industry association SEMI said 29 new high-volume fabrication facilities would be completed in 2021-2022 – eight in China and Taiwan, respectively. This entails an estimate of more than US$140bil (RM586.6bil) in equipment spending over the next few years.
Maybank IB, which is maintaining a “buy” call on the stock with the unchanged target price of RM3.90, said its financial year 2021-2023 earnings forecasts are intact, pending further operational updates and/or earning releases.
“There are several risk factors for our earnings estimates, target price and rating for Frontken. A sharp downturn in the global markets for electronics and/or oil and gas will affect the demand for Frontken’s services.
“Additionally, forex volatility, especially the US dollar against the ringgit, will affect the company’s earnings, as about a fifth of the group’s revenue is denominated in US dollar, ” it added.