| ADD (INITIATED)
APRIL 17 CLOSE: $0.655
TARGET PRICE: $0.90
CGS-CIMB, April 16
Frencken is a manufacturing solutions provider with a global presence and two key divisions - mechatronics and integrated manufacturing services (IMS).
We believe Frencken's estimated FY2019 earnings will be driven by the industrial automation segment, which is part of the mechatronics division. We project 24 per cent year-on-year revenue growth for this segment in FY2019.
As part of its usual business development efforts, we believe Frencken would continue to pursue new opportunities with customers in the semiconductor and analytical segments too.
Frencken had a net debt balance sheet of $2 million at end FY2018. Although it does not have a formal dividend payout policy, Frencken's dividend payout ratio has historically been in the 30 per cent range.
Based on a payout ratio assumption of 30 per cent, we estimate FY2019-2021 dividend yields of 4.1 per cent to 4.3 per cent.
Potential key catalysts for the stock are stronger-than-expected orders in the industrial automation segment and the analytical segment.
Upside earnings risk stems from new customer wins by Frencken, as well as higher-than-estimated demand from Seagate. Downside risks are order delays or pullback by customers.
| HOLD (MAINTAINED)
APRIL 17 CLOSE: $0.41
FAIR VALUE: $0.41
OCBC Investment Research, April 17
Roxy-Pacific's project pipeline faces somewhat mixed prospects, in our view.
The 22 Farrer Road site could be a beneficiary from the sale prohibition of units at the former Normanton Park site, while the 15, 17 & 19 Lorong Kismis and Dunearn 386 projects could face keen competition in Bukit Timah.
As a recap, March saw developers selling 1,054 private units (excluding executive condominiums), representing a 47.2 per cent year-on-year increase.
This is not surprising, given that 1,821 units were launched following the Chinese New Year festivities.
For the first quarter of 2019, total private units sold amounted to 1,946 units, representing a 20 per cent year-on-year increase.
The bumper supply in 2019 should continue to drive sales, but potential buyer fatigue, translating into a more subdued sell-through rate would be a cause for concern.
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