"We expect this to translate to more orders for Frencken, as ASML demands more parts to fulfil its order backlog," state the analysts in their Jan 16 note.
Frencken is likely to see stronger orders from its other customer segments.
For one, the surge in demand for AI data centres means there is a growing need for storage capacity and as such, Frencken might see more industrial automation orders from its key customer in this segment, Seagate, whose capex is doubling from US$265 million in FY2025 to US$536 million in FY2027.
In automotive, Frencken's customer Gapwaves could see demand for its automotive sensors inflect upwards as adoption finally takes root in 2026.
See also: DBS maintains 'buy' call and $2.50 target price on CICT
Foo and Tan point out that Frencken, despite a 9% FY2026 ROE, which is in line with the industry average, trades at a discount to its peer average of 19x PER.
According to the analysts, by applying a PB-ROE regression, they see potential for Frencken to re-rate to at least 17x FY26E PER.
Their $1.76 target price is based on 17x FY26E PER, which is +1.3SD to its average, justified by recovering semiconductor orders underpinning solid earnings growth.
