KUALA LUMPUR: The bull run on the Nasdaq index has led to a surge in demand for stocks related to artificial intelligence (AI), which has drawn attention to Frontken Corp Bhd from local investors, according to Hong Leong Investment Bank (HLIB Research).
The investment bank said that large corporations such as NVIDIA, Advanced Micro Devices (AMD), and Google have seen notable improvements in their stock prices due to the increasing demand for AI processors and cloud services.
"Even though Bursa Malaysia stocks are not directly involved in AI, Frontken benefits indirectly because of its successful cleaning business with major foundries in Taiwan, which is its main source of income.
"Frontken specialises in cleaning and surface treatment services for these foundries, using advanced technology to handle very small wafers," it said.
In 2024, semiconductor sales are projected to rebound with 13 per cent year-over-year (YoY) growth, as forecasted by World Semiconductor Trade Statistics (WSTS).
Taiwan Semiconductor Manufacturing Company (TSMC), in its fourth-quarter (4Q) 2023 earnings call, indicated that earnings have bottomed out and anticipates a strong growth year in 2024.
HLIB Research said the growth is driven by the ongoing expansion of leading-edge 3nm technologies, high demand for 5nm technologies, and robust AI-related demand.
"Increased output from foundries is expected to drive demand for Frontken's services, enabling them to support production and prolong the life of chamber components.
"This positions Frontken as a beneficiary of the front-end semiconductor industry's growth," it continued.
Additionally, in the fiscal year 2023 (FY23), the oil and gas sector (O&G) contributed 23 per cent to the company's overall turnover.
HLIB Research said Frontken is optimistic about further growth in fiscal year 2024, driven by increased orders from contracts for engineering services, manpower supply, and mechanical rotating equipment services and parts with major oil companies.
Frontken's stock price is currently trading between RM3.64 and RM3.70, an upward trend.
"If the price successfully rises above RM3.74, it could increase further to RM3.87, RM4.00, or even RM4.10, forming a higher high pattern. It is advised to cut losses if the price falls below RM3.50," said HLIB Research.
