Frencken Group (SGX: E28) shares are up 7% in Singapore today. Which could be thought of as a little odd, for the results weren’t in fact all that good. However, analysts are upgrading their predictions for the near future. Which is one of those things we’ve always got to keep in mind. What has happened is not what determines a share price. It’s beliefs about the future, about what will, that matter. The current share price - of any capital asset - is the net present value of all future income. So, beliefs about that future change, then so does the share price.
The Frencken business: “Frencken Group is a high-technology capital and consumer equipment service provider of complete and integrated one-stop outsourcing solutions to a diversified customer base comprising of renowned global companies in the medical, semiconductor, analytical, industrial automation, automotive, office automation and consumer industries. Leveraging on its advanced capabilities and facilities, the Group provides a comprehensive range of product solutions that span the entire value chain – starting from initial product design, development and prototyping, to engineering, final test and series manufacturing.”
OK, but the recent results were not good: “Frencken Group E28 has announced earnings of $7.1 million for its 3QFY2023 ended Sept 30, a 35.1% y-o-y decline, as the technology sector continued to face challenging business conditions during the quarter. For the same period, the company reported revenue of $184.4 million, down 5.6% compared to 3QFY2022.”
Frencken Group share price from Google Finance
We might, therefore, expect a falling share price as a result. But actually it’s been rising recently: “Frencken Group's (SGX:E28) stock up by 7.0% over the past three months. “ OK, that’s not very much, but it is something. So, if results were worse, why a rising share price?
The answer is here: “DBS Group Research on Thursday (Nov 23) upgraded Frencken Group to “buy” from “hold” and raised its target price by 70.5 per cent to S$1.33 from S$0.78.It said the semiconductor and machine manufacturer is poised for recovery, supported by a sound balance sheet and its diversified portfolio. This comes as the research team expects the semiconductor industry to register “strong growth” in 2024 and 2025 following a weak 2023.”
Yes, we know the semiconductor market has been weak. But we expect it to improve - it’s the future that matters to a share price, not the past nor even the present.