"Frencken remains exposed to ASML, which is a strong beneficiary of the semiconductor equipment sector’s growth," says Yeo, citing forecasts of 8% CAGR between 2025-2027 by industry association SEMI.
According to SEMI, global sales of total semiconductor equipment by OEM manufacturers are expected to reach US$133 billion in 2025, an increase of 13.7% over the preceding year, and further grow to US$156 billion in 2027.
Specifically for ASML, the Dutch company has guided for revenue to be between EUR34 billion and EUR39 billion for FY2026, up between 4 and 19%.
Yeo expects Frencken, which has key operating sites in Malaysia, to benefit from the positive external macroeconomic outlook for the country.
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For one, citing his colleagues with the economics team, Yeo says that tariff risks will ease, supporting global trade and demand, fuelling a more positive manufacturing and export outlook.
RHB's economists expect Malaysia’s exports to grow at 9.3% this year, a pick-up from 6.5% last year, thanks to strong global demand as well.
In Singapore, where Frencken operates too, is seen to increase its full-year industrial production at 4%, due to "firmer" electronics and non-electronics exports, positive spillover from the ongoing global electronics upcycle, and resilient regional demand.
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Specifically, Yeo expects Frencken to see more demand in the second half of the year as ASML clears excess inventory by the end of June.
As such, he has raised his earnings forecast for FY2026 and FY2027 by 5%.
Yeo has also applied a higher valuation multiple of 19x earnings, from 17x, which puts it more in line with Frencken's peers, as the company is seen to enjoy stronger earnings outlook and market re-rating on the back of fund flows and higher liquidity in the Singapore market.
Frencken Group shares traded at $1.63, down 1.81% as at 9.47 am. It is up 45.54% in the past year.
