KUALA LUMPUR (March 5): Phillip Capital has initiated coverage on Frontken Corp Bhd with a “buy” rating at RM3.67 and target price of RM5.20 based on a target 43 times price-earnings (PE) multiple on 2025 estimated earnings per share (EPS).

In a note on Tuesday, the research house said it likes Frontken for its front-end semiconductor exposure and strong earnings growth (three-year compound annual growth rate: 26%). Key downside risks include customer concentration risk, ringgit strength, and weaker-than-expected customer orders.

It said was positive on Frontken’s long-term prospects on the back of an expectation of a global semiconductor sector recovery and foundries expansion to increase capacity.

“We expect Frontken to ride on the technological advancement of its key wafer fab customers as they transition to the latest nodes, such as 2nm, while also benefiting from the ramp-up of older and mature 3/5nm nodes.

“We see Frontken’s potential to seize further growth opportunities alongside investments from Infineon, Micron, UMC, Global Foundries, and LAM Research in Malaysia and Singapore,” it said.