's purchase of its new Taiwanese facility could potentially double its output in the country in the long-term, leading to bright earnings growth prospects for the group.Maybank Investment Bank Research, which has a "buy" call on Frontken with a target price of RM3.90, said it is upbeat on the group's outlook given its resilient job order flows and expansion in Taiwan.
The research house is also positive on the near-term outlook due to the global semiconductor industry's upcycle, which leads to increase in equipment and equipment spending.
"We note that Frontken has most front-end semiconductor companies as its customers (within their operating countries)," it said.
SEMI, the global industry association, said a total of 29 new high-volume fabrication facilities will complete in 2021-2022, with eight in China and Taiwan respectively. This is expected to entail over US$140bil in equipment spending over the next few years.
Maybank IB left its FY21-23 earnings forecasts intact pending further operational updates and earnings releases.
While its earnings growth projection is primarily anchored by the semiconductor segment, it noted that the recovery of the oil and gas sector could serve as an additional near-term growth catalyst.
Frontken is targeting to complete the purchase of its new Taiwanese facility soon, followed by renovation/modification works in the coming months.
Meanwhile, Frontken is planning for the new plant’s full operations to go in tandem with the commercial production of the 3nm advanced chips by its key customer.
At this juncture, this is expected to take place around mid-2022, said Maybank IB.