Frontken's earnings delivery rebounded strongly in 3Q24 with marked sequential improvements across key markets. Despite lowering FY24E earnings by 8% (FY25E/26E maintained), Maybank IB said it raises its TP to MYR4.95 (+18%).
Results miss, but plenty of silver linings
Ex-one offs (-MYR0.7m), FRCB's registered 3Q24 core net profit (CNP) of MYR36.0m (+37% YoY, +11% QoQ). Cumulatively, 9M24 CNP of MYR95.1m (+21% YoY) fell short of estimates, coming in at just 63% of ours and consensus' FY24E. Buoyed by a stronger-than-expected sequential pickup in MY and SG turnover, FRCB's 3Q24 group turnover of MYR144.3m (+8%
YoY, +7% QoQ) was its highest quarterly turnover on record. Segmental revenue also exceeded MYR100m in TW for the first time on record.
MY woes resolved; gearing-up for a stronger FY25
Positively, SG and MY EBIT margins rebounded with sequential improvements of +3ppts/+5ppts after a weak 2Q24 (Kulim plant fire, O&G invoice timing issues). SG run-rates continue to track higher in QtD-4Q24, underpinned by improving order visibility from semicon customers. In MY, FRCB's Kulim plant is back to full operational capacity, while its O&G invoicing uncertainties seem resolved as the house gathers its customers are in the process of renewing their contracts.
Notwithstanding an expected strong finish to the year in 4Q24E, Maybank IB cuts the FY24E earnings by 8%, but maintain FY25E/26E earnings. With the worst likely behind FRCB, the house opines that resilient FE semicon growth momentum in SG will continue to drive FRCB's group earnings higher in FY25E
