PETALING JAYA: Despite the challenges in the semiconductor industry, Frontken Corp Bhd was able to achieve an all-time high core net profit for the third quarter of financial year 2022 (3Q22), which came due to margin improvements.
The surface and mechanical engineering solutions provider reported a core net profit of RM34mil in 3Q22, bringing its nine-month profitability to RM94mil, which was a 26% increase year-on-year.
Hong Leong Investment Bank (HLIB) Research said Frontken results were in line with expectations, accounting for 77% and 74% of HLIB Research’s and consensus full-year forecasts, respectively.
“Overall, the strong performance was attributable to operational excellence, which yielded better earnings before interest tax depreciation and amortisation margins,” it said in a report.
On the outlook, HLIB Research said Frontken believes the persistent demand remains a growth catalyst and will lead to more chip research, design and manufacturing in the years ahead.,
“Despite the inventory adjustment and slower macroeconomic growth, a Taiwanese client expects these negativities will be balanced by sustainable ramp-up of its industry-leading advanced technologies,” the research house said.
It noted that the group’s new Plant 2 will be receiving parts for test run.
HLIB Research said the semiconductor segment generated 80% of the group’s revenue in 3Q22 compared with 85% in 3Q21.
As for its oil and gas (O&G) segment, it said Frontken is “cautiously optimistic” that the business will be strong for the remaining months in financial year 2022 (FY22) due to increased orders from Petroliam Nasional Bhd.
The O&G segment accounted for 20% of the group’s turnover in 3Q22.
The research house reiterated its “buy” call with an unchanged target price of RM3.20 per share, based on a price-to-earnings multiple of 30 times of FY23 earnings forecast.