Frencken Group Ltd

[GreedandFear]

A belated post...following Frencken's Q1 earnings :

http://infopub.sgx.com/Apps?A=COW_CorpAn...esults.pdf

Revenues.
Q1 2013 : 107,240
Q2 2013 : 108,469
Q3 2013 : 119,601
Q4 2013 : 109,427
Q1 2014 : 110,904

Gross Profit (% margin)
Q1 2013 : 15,142 (14.1%)
Q2 2013 : 16,913 (15.6%)
Q3 2013 : 19,493 (16.3%)
Q4 2013 : 15,388 (14.1%)
Q1 2014 : 17,315 (15.6%)

Net Profit (% margin)
Q1 2013 : 3,240 (3.0%)
Q2 2013 : 4,150 (3.8%)
Q3 2013 : 6,933 (5.8%)
Q4 2013 : 3,809 (3.5%)
Q1 2014 : 3,848 (3.5%)

Note that Management highlighted, at the time of the Q3 2013 earnings, that these were extraordinarily high (due to higher orders and FX) and should not be extrapolated to future earnings.

Trailing 12 months revenues of $448MM are roughly flat with 2013 full year revenues of$444MM but gross profit ($69.1MM vs $66.9MM) and net earnings ($18.7MM vs 18.1MM) are slightly higher. Trailing EPS is at 4.61 cents vs 4.47 cents giving a trailing PE of 7.6x which still seems reasonable. NAV of 52.15 cents vs share price of 35 cents so a 33% discount and a dividend yield of 4% based on the 2013 dividend of 1.40 cents.

Revenues continue to be diversified from various industrial sectors (see below) which is why I continue to like it as a diversified play on global manufacturing growth

Segment revenues (Q1 2014 vs Q1 2013)
Semi-conductor : 16.6MM vs 9.8MM
Medical : 16.8MM vs 17.2MM
Analytical : 22MM vs. 22.4MM
Industrial Automation : 6.7MM vs 8.9MM
Office Automation : 5.8MM vs 7.4MM
Automotive : 28.1MM vs 23.2MM
Consumer & Industrial Electornics : 5.2MM vs. 6.2MM
Tooling : 3.4MM vs 2.7MM
Others : 8.3MM vs. 9.4MM

Much of the companies growth in revenues and improvements in margins have followed the acquisition of Juken (now folded into the various product lines) in late 2012. Margins have also benefited from a turn-around in their Malaysian manufacturing and lastly, a large part of their revenues go to Europe so a strong EUR helps margins. The last point is worth monitoring given the ECB's concerns over a strong EUR and likely easing of monitary policy in June. So some potential headwinds and we are unlikely to see the kind of strong growth in earnings witnessed over the past few years. However, still seems like a cheap proxy for global growth with both earnings growth potential and a PE re-rerating potential.

Lastly, the company has just announced that CEO is taking a medical leave of absence. Not a good thing but hopefully the management bench is deep enough to handle the company until he returns.

(vested)

[GreedandFear]

CIMB picks up coverage with an estimate of 44 cents a shares (current 38).

https://sites.google.com/site/researchre...052014.pdf

[cyclone]

Request for Trading Halt: Pending Announcement.

To make another major acquisition ??

[cyclone]

Request for Trading Halt: Pending Announcement.

To make another major acquisition ??

It turns out to be demise of the group's president and executive director.
Rest In Peace.

http://infopub.sgx.com/Apps?A=COW_CorpAn...uddies.com

It is with deep sadness and regret that the Board of Directors of Frencken Group Limited (the “Company”, and together with its subsidiaries, the “Group”) announces that Mr Gooi Soon Hock, the Group’s co-founder, President and Executive Director, had passed away on 30 December 2014.

Mr Gooi was the driving force in building and transforming the Group from an electronics contract manufacturing company based in Penang into a high-technology capital equipment and consumer product service provider to a global customer base with operations spanning three continents.

The Directors, Management and Staff of the Group would like to extend their deepest condolences to the family of the late Mr Gooi. Mr Gooi will always be remembered for his guidance, leadership, dedication and invaluable contributions to Frencken Group over the years.
...

[valuebuddies]

It came to my surprise that the company with more than 60 years of history, having global presence in US, Europe, ASEAN and China, listed in SGX for the last 10 years and without failing to pay dividends for the past 9 years attract so little attention. A search via Google screener reflect a PE of 6.3, dividend yield of 6.5% and PTB of 0.42 based on the current price.

The company has 2 major business divisions, Mechatronics division (manufacturing metal components and systems for capital equipment) and Integrated Manufacturing Services IMS division (plastic injection moulding). Over the past 3 years, the company has been actively into M&A which signifies that the management's interests are in line with the minority:

i) 2012 - acquired US Motion Inc
ii) 2012 - acquired and privatised Juken Technology Limited
iii) 2013 - acquired ALL MEPP Holding BV in Netherland
iv) 2013 - acquired 51% equity in Supertool Pte Ltd
v) 2014 - acquired NTZ International Holding BV

The revenue for year 2011 (prior to these acquisitions) were 336M, and now for 2014, it recorded 357M revenue just within 9-months period. Significant contribution were came from Juken which involved in the IMS division serving the automotive industries.

Judging on these past developments, I expect to hear more M&A news in 2015 and beyond.

The downside risk is potentially resulting from the fluctuation of EUR and USD against MYR and RMB, as most of the company revenue were derived in EUR and USD though produced in Malaysia or China. The recent slumps in EUR explains why the shares were beaten down.

Well it is true that things are cheap for reasons, but I think this one is probably too cheap for a reason.

[position initiated]

[mrEngineer]

I think previously mentioned in the thread that one concern is about the debt

[gzbkel]

Hi, I just took a quick look at past records without digging too deeply.

I noticed that the revenue has almost doubled compared to 5 years ago, but the net income has not changed much.
Is this a cause for concern? Anyone knows the reason for the decrease in net margin?

[valuebuddies]

They went through tough learning curve few years ago when they started the IMS division, just started to make profits since the year 2013. Their earnings are indeed very fluctuate as the currencies matter play a significant part.

[valuebuddies]

Appointment of new director:

http://infopub.sgx.com/FileOpen/FG_GooiS...eID=334356

The Group will benefit from Dato’ Gooi’s wealth of experience and network of contacts in the global technology industry. In an illustrious career spanning 30 years, he has held senior management appointments overseeing a diverse portfolio of businesses in life sciences, chemical analysis, electronics and semiconductor industries.

In his present position as Senior Vice President of Keysight Technologies, Dato’ Gooi oversees the global operations of Keysight Technologies’ Order Fulfillment & Infrastructure across the U.S.A., Europe and Asia. Prior to this, Dato’ Gooi was Senior Vice President of Agilent Technologies and President of Agilent Order Fulfillment where he led and managed the global operations of the Life Sciences, Chemical Analysis and Electronic Measurement business groups.

He was also previously Vice President and General Manager of Agilent Technologies’ Electronic Instruments Business Unit, and was instrumental in improving profitability and driving growth of the semiconductor, industrial and automotive businesses. Dato’ Gooi is a board member of the Malaysian Investment Development Authority. He holds a Bachelor of Science degree with first class honors in engineering from University of London and a Masters of Science degree in computing science from Imperial College of Science and Technology, London.

[cyclone]

The Company will be releasing its financial results for the 12 months ended 31 December 2014 ("FY2014") after trading hours on Thursday, 26 February 2015