FRONTKN
Frontken Corporation Berhad
Company Background
Frontken to Gain from High Demand for Chips Due to AI Boom
The emergence of DeepSeek, a Chinese artificial intelligence (AI) startup, is positive for the overall development of AI and hence bodes well for Frontken Corp Bhd as increased adoption could see higher demand for semiconductors.
According to Affin Hwang Investment Bank Research, DeepSeek, which claims to rival the performance of its US counterparts at a fraction of the cost, may lead to evaluation of strategies by big tech firms.
“DeepSeek marks a significant advancement and could signal a beginning of an inflection point for the AI industry. “The increased efficiency leads to a substantial reduction in costs and adoption barriers, which will likely accelerate AI adoption and application deployments, thereby driving potential incremental demand for AI going forward,” the research house said.
It highlighted that big tech firms such as Microsoft, Meta and Google, had reaffirmed their commitment to major AI investments in their recent earnings calls.
“Going forward, management expects 2025 to be a good year, given the rising demand from customers amid the AI boom and the planned mass production of new nodes technology.
“This is consistent with our team’s view that the tech cycle will see a prolonged upturn, thanks to continued AI strength and fuelled by restocking across non-AI demand verticals, with the cycle peaking in 1H26,” the research house said.
Based on SEMI’s forecasts, semiconductor production capacity is expected to grow by 6.6% to 33.6 million wafers per month in 2025, with the expansion mainly driven by demand for high-performance computing and generative AI applications.
“For future expansion, Frontken plans to acquire land near plant one, and is in discussions for the potential acquisition.
“If materialised, it will be used for the new project that it is currently working with original equipment manufacturers (OEMs),” Affin Hwang said.
It said the company has begun working on the project since last year on a small scale, and management is optimistic about the outlook and potential of the project, though it will take time to grow.
“The opportunity opens doors as equipment sales increase significantly and OEMs are required to localise servicing for customers, hence OEMs are keen to work with Frontken to fulfil the requirement.
“If this becomes fruitful, it signifies an expansion of the client base to having OEMs as customers. Besides, management remains keen on acquisition in the United States for geographical expansion, and continues to be in discussion for a potential acquisition,” the research house said.
It has maintained a “buy” call, but with a lower 12-month target price of RM5.13 from RM5.45, based on a target price earnings (PE) ratio of 52 times applied to our 2025 earnings per share from 55 times 2025 PE. “We believe Frontken deserves a valuation premium given its unique exposure to the front-end semiconductor equipment value chain. Frontken is also a major Bursa proxy for global AI growth and front-end semiconductor value chain,” Affin Hwang said.The stock was last traded at RM3.90, valuing it RM6.22bil.
$FRONTKN / 0128 (FRONTKEN CORPORATION BERHAD)
Extracted from "The Star"
Sharing from remisier
2025 Market Strategy
Positive on MY equity market outlook. However, potential risks from additional US tariffs and stronger US$ could slow foreign fund inflows into EMs, which has historically been a determinant on KLCI return
US-China trade tensions and tariffs will be a key theme to watch for next year, likely leading to some market volatility. However, we view this as opportunity to accumulate on winners, especially if market overreacts to perceived negative effects
Stocks benefiting from the trade conflict, with strong earnings visibility, are particularly attractive. Small/mid caps which are still recovering from the sharp sell-off in Aug look appealing at current level. With a more risk-on sentiment expected, coupled with strong domestic liquidity, clear thematic drivers, and supportive govt policies, we expect SC to outperform in 2025
⭐️ 2025 FOCUS THEMES
✨ Sustained FDI growth
✨ Acceleration of infra spending
✨ Rapid AI adoption
✨ Rising focus on local green energy
✨ Expanding DCs infra
✨ Tariff-driven glove sector recovery
🌟 2025 CONVICTION BUYS 🌟
SMALL MID CAPS
🛫 AGX (TP: RM0.84)
🛢️ Armada (TP: RM0.93)
🏗️ Binastra (TP: RM2.30)
♻️ BM Green (TP: RM2.65)
⚙️ Critical (TP: RM1.65)
🛢️ Dayang (TP: RM4.50)
⚡️ HEGroup (TP: RM0.84)
☀️ Pekat (TP: RM1.15)
⚡️ MN (TP: RM1.45)
📲 OCK (TP: RM0.85)
LARGE CAPS
🏦 CIMB (TP: RM9.30)
💻 Frontken (TP: RM6.00)
🏗️ Gamuda (TP: RM5.55)
🧤 Hartalega (TP: RM4.55)
🤖 NatGate (TP: RM3.00)
🇲🇾 2025 Macro Forecast
🎯 KLCI target: 1,750
💲 US$/RM: RM4.30
🏦 GDP: 5.1%
🏦 OPR: 3%
🛢️ Brent: US$80
We're Overweight on 12 sectors that align with our thematic ideas, supported by strong conviction BUYs. Feel free to reach out and have a chat on our market outlook/ideas
$FRONTKN / 0128 (FRONTKEN CORPORATION BERHAD)
$PEKAT / 0233 (PEKAT GROUP BERHAD)
$OCK / 0172 (OCK GROUP BERHAD)
$FRONTKN / 0128 (FRONTKEN CORPORATION BERHAD)
Research by MAYBANK
$FRONTKN / 0128 (FRONTKEN CORPORATION BERHAD)
Research by HLIB
$FRONTKN / 0128 (FRONTKEN CORPORATION BERHAD)
Research by Apex Securities
$FRONTKN / 0128 (FRONTKEN CORPORATION BERHAD)
Research by Maybank
$FRONTKN / 0128 (FRONTKEN CORPORATION BERHAD)
Research by Maybank
Buy – TP RM 3.63
" Briefing updates”
We turn more positive on Frontken’s 2H24 earnings outlook following our recent meeting with mgmt, coupled with its recent share price correction (-23% since 10 Jul 2024). We maintain FY24-26E earnings, but U/G the stock to BUY from HOLD on improving risk-reward amidst more palatable valuations (currently trading at 30x FY25E PER). Our TP of MYR4.20 is still pegged to 35x FY25E PER, at LT mean)
Analyst:
Anand Pathmakanthan
anand.pathmakanthan@maybank-ib.com
Arvind Jayaratnam
arvind.jayaratnam@maybank.com
$FRONTKN / 0128 (FRONTKEN CORPORATION BERHAD)
Research by APEX
HOLD – TP RM4.33
" Impacted by O&G business”
• Frontken’s 1HFY24 net profit at RM63.4m missed our expectations, primarily due to sluggish results in Oil & Gas (O&G) segment.
• Looking ahead, we hold a positive earnings growth outlook, supported by expectations of volume and margin expansion with stronger orders from customers and Plant 2 production ramp up.
• We downgraded our recommendation to HOLD with unchanged target price of RM4.33 by pegging PE multiple of 35.0x to FY25F EPS of 12.5 sen.
Analyst:
Jayden Tan
kdtan@apexsecurities.com.my
$FRONTKN / 0128 (FRONTKEN CORPORATION BERHAD)
Research by HLIB
BUY – TP RM4.49
" Impacted by O&G weakness and Kulim fire”
2Q24 revenue of RM135m yielded a core net profit of RM32m (+8% QoQ, +10% YoY), bringing 1H24 sum to RM62m (+18% YoY) which missed expectations. 2Q24 performance was hampered by (i) inability to invoice for some O&G completed jobs; and (ii) fire at Kulim facility. For semi, it is seeing much better utilisation of its second Taiwan facility with increasing client demands and some development projects are also starting to bear fruit. For O&G, it will invoice for completed jobs when its customers get new budget allocations. Maintain BUY with a lower TP of RM4.49, pegged to 35x of mid-FY26 EPS.
Analyst:
Tan J Young
jytan@hlib.hongleong.com.my
$FRONTKN / 0128 (FRONTKEN CORPORATION BERHAD)
Research by Maybank
HOLD – TP RM4.20
" 2Q24: Negative surprises”
FRCB’s 2Q24 earnings was dragged by O&G-related billing issues and the fire incident at its semicon plant in Kulim. We lower FY24E earnings by 11% but maintain FY25-26E. This leads to a lower TP of MYR4.20 (-12%) as we also peg valuation to a lower 35x FY25E PER, its updated LT mean (previously 39x FY25E PER). Now on a balanced risk-reward profile, we downgrade FRCB to HOLD from BUY.
Analyst:
Anand Pathmakanthan
anand.pathmakanthan@maybank-ib.com
Arvind Jayaratnam
arvind.jayaratnam@maybank.com
$FRONTKN / 0128 (FRONTKEN CORPORATION BERHAD)
$ATAIMS / 8176 (ATA IMS BERHAD): A Notable Investor Takes the Spotlight
Mr. Ooi Keng Thye, a lesser-known but accomplished individual investor in Malaysia, has steadily built a reputation in the investment community, particularly in the tech sector. Though not as widely recognized as prominent figures like Fong Siling and Koon Yew Yin, Mr. Ooi's investment successes provide valuable insights for those interested in technology stocks.
1. $FRONTKN / 0128 (FRONTKEN CORPORATION BERHAD): Among Mr. Ooi's most successful ventures is his investment in FRONTKN. During a period when the company's fundamentals were shaky and its share price hovered between RM0.15 and RM0.20, Mr. Ooi made a strategic move, purchasing shares at around RM0.15 to RM0.30. By FY14, he had acquired a significant stake of 2.8 million shares, eventually increasing his holdings to 141 million shares by FY18. This investment is widely regarded as one of Mr. Ooi's most successful endeavors.
2. $INARI / 0166 (INARI AMERTRON BERHAD): Mr. Ooi also became a substantial shareholder of INARI in FY13. However, subsequent rights issues diluted his stake, and he no longer appeared as a significant shareholder in later years.
3. $GTRONIC / 7022 (GLOBETRONICS TECHNOLOGY BERHAD): As of the FY23 annual report, Mr. Ooi holds 74.2 million shares in GTRONIC, with the latest updates indicating an increase to 76.9 million shares, further solidifying his position in the tech sector.
4. Recent Developments in ATAIMS: The latest FY24 report from ATAIMS reveals Mr. Ooi as a substantial shareholder with 25.9 million shares. ATAIMS had previously faced challenges, including significant losses following the loss of Dyson as a major customer. However, the share price has shown signs of recovery, and the company recently announced a partnership with a Chinese firm to explore opportunities in the household and electrical appliances market.
5. $NOVAMSC / 0026 (NOVA MSC BERHAD): Beyond these well-known companies, Mr. Ooi is also the largest shareholder in NOVAMSC, holding a 14.79% stake. However, the future profitability of this loss-making company remains uncertain.
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$FRONTKN / 0128 (FRONTKEN CORPORATION BERHAD)
AI Boom: Stock Price Movements with High Correlation
The AI boom has undoubtedly brought benefits to many companies across various sectors, not just the technology sector. Interestingly, some Malaysian tech companies have directly benefited from big tech companies, resulting in stock price movements that closely correlate with these giants.
The first notable company is $INARI / 0166 (INARI AMERTRON BERHAD), the largest tech company listed on Bursa Malaysia. Inari, an Outsourced Semiconductor Assembly and Test (OSAT) company based in Penang, derives over 90% of its revenue from a single customer: Broadcom. Broadcom develops 5G radio frequency components for Apple, making Apple a key indirect customer for Inari. Consequently, iPhone sales directly impact Inari's revenue.
The second company is $FRONTKN / 0128 (FRONTKEN CORPORATION BERHAD). Frontken specializes in cleaning and surface treatment services for foundries, using advanced technology to handle extremely small wafers. Most importantly, TSMC is one of their key customers. TSMC's success amid the AI boom benefits Frontken as well. Recent quarterly results announced by TSMC have also positively influenced Frontken's share price.
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Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
$FRONTKN / 0128 (FRONTKEN CORPORATION BERHAD) 2024 AGM
📌 Development:
✅ United States: FRONTKN indicates a willingness to develop in the US, likely due to TSMC's needs.
✅ Japan: Development is not being considered in Japan as it primarily remains at the mature 28nm process.
✅ Singapore: Some development will take place in Singapore.
📌 Scope of Services:
✅ Advanced Machinery: Frontken services machinery below the 7nm process and can support up to the 2nm process.
✅ Profit Margin: Despite rising utility costs, maintaining profit margins is crucial, indicating a deep competitive moat.
📌 Cleaning of Packaging Machinery:
✅ 3D Packaging: Advanced 3D packaging, including CoWoS machinery, does not require extensive support from Frontken and has only a small demand currently.
✅ Outlook in Malaysia: No significant near-term outlook for advanced packaging in Malaysia.
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Additional Listing Announcement /Subdivision of Shares
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD
General Meetings: Outcome of Meeting
Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD