Frencken Group

Frencken Group: OSKDMG intiates coverage with Buy and TP $0.45. The house notes that Frencken, a high-tech contract manufacturer, is now a monster of a bargain owing to previous missteps that we think are a now thing of the past. The company designs and manufactures capital and consumer equipment for businesses. It also offers one-stop services along the entire value chain, ie from initial product design, development and prototyping, to engineering, final testing and series manufacturing. With revenue growth, improved production efficiency and yield rate, expect the company’s FY14 profits to surge 30%. Given its: i) turnaround, ii) future growth catalysts, iii) diversified blue chip clients (Phillips, FEI, Siemens), and iv) attractive dividend yield (4.5%/5.2% FY13/14), believe this 60-year-old firm is primed for growth. Initiate coverage with a BUY and $0.45 TP, based on 9x FY14F P/E.