- Semiconductor Segment: A key customer highlights that China revenue is expected to stabilize in 2025, but delays in customer investments could push shipments to 2026.
- Analytical Life Sciences Segment: A major customer reports muted economic activity in China, hoping for a boost from government stimulus.
- Medical Segment: A key customer sees flat sales and decreased orders due to declining demand in China.
Frencken Group Ltd (SGX:E28)(FREN.SI) is facing a challenging outlook as negative signals from key customers suggest a contraction in FY2025 revenue. Despite these headwinds, order recovery in the semiconductor segment remains intact.
For investors who are not familiar with Frencken, the company provides integrated technology solutions to various industries, including semiconductors, analytical life sciences, and medical. The company has a global presence, with operations spanning across Asia, Europe, and the US.
Market Outlook
1. Semiconductor Recovery Weakness
A key semiconductor customer for Frencken, ASML Holding NV, during its 3Q 2024 earnings call, said that it expects its revenue from China to normalize to 20% of its total revenue for 2025. The Dutch multinational corporation said they have completed order backlog for China and are factoring possible new export restrictions.
ASML also noted that customers are delaying their investments in semiconductor fabrication facilities, which means shipments of ASML products to customers might be postponed to 2026.
2. Analytical Life Sciences Demand Muted
A significant customer for Frencken in this segment, Thermo Fisher Scientific Inc, during its 3Q 2024 earnings call, reported that economic activity in China was muted and hopes that government stimulus will boost demand in 2025.
3. Medical Segment Sales Slowdown
Major Frencken customer, Philips Healthcare, reported flat sales and decreased orders due to declining demand from hospitals and consumers in China. Philips Healthcare expects the market conditions in China to remain uncertain due to anti-corruption measures and the lack of impact from the national renewal program, which are affecting order volumes and lead times.
Investor Insights
For investors’ knowledge, the semiconductor segment accounted for 42.1% of Frencken’s revenue in the first half of 2024 (1H 2024). The analytical life sciences segment contributed 24.4%, while the medical segment made up 16.6% of Frencken’s 1H24 revenue.
While the outlook seems challenging, potential catalysts such as new end-consumer products and better cost controls could drive faster recovery in its semiconductor segment. Maintaining a cautious yet optimistic stance, investors should watch for signs of recovery and be prepared for risks such as cost escalation.
Disclaimer: ProsperUs Manager of Content Hailey Chung doesn’t own shares of any mentioned companies.
Reference
CGSI Note | Frencken Group Ltd | Nov 1, 2024
