Frencken Group

Buy

Target price: $0.79

Jan 24 close: $0.645

Broker: UOB Kay Hian, Jan 22

A high-tech manufacturer with a diversified portfolio of blue chip customers in various industries, Frencken represents an excellent proxy to Europe's economic recovery.

This "mini-Venture" is available at bargain prices. We believe its recent disposal of Precico Electronics is a positive and its roughly 20 per cent earnings compound annual growth rate momentum will continue into 2019. Initiate coverage with "buy", with price-to-earnings ratio-based target price of $0.79.

Even during trough years such as 2012, where it reported a loss, the group still paid out dividends.

With a robust cash pile arising from the bumper years ahead, we are positive on the likelihood of 35 per cent dividend payout ratio.