In his Nov 2 report, Seet notes that Qualcomm, a key player in semiconductors, has just reported better-than-expected 4Q earnings and has given a much stronger forecast, pointing towards the sector's potential recovery next year.
Frencken's own key customer, ASML, which builds vital machinery for the semiconductor sector, is expecting flat growth in FY2024.
Nonetheless, Seet believes that Frencken’s factory in Malaysia should still benefit from higher utilisation as ASML shifts some production from Europe to Malaysia, giving Frencken additional revenue share over a Europe-based competitor.
Seet, citing the management, expects higher revenue from the semiconductor industry for 2HFY2023 over the preceding half year.
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"We believe key customers have seen their inventory levels dwindle at a faster rate than expected, prompting them to raise their orders," says Seet.
"Frencken should continue to gradually improve in subsequent quarters and we see significant upside, especially if the semi-conductor recovery materialises," says Seet, adding that Frencken is his top pick among the stocks he covers in the tech sector.
