• Profile: Listed on the ACE Market in 2006, Frontken is a leading engineering service provider for a wide range of industries, including oil and gas, petrochemical, power generation, semiconductor and electronics manufacturing sectors in the Asia region. The company also owns a 57.9% stake in Ares Green Technology Corp (listed in Gretai Securities Market, Taiwan), whose customers include Taiwan Semiconductor Manufacturing Company (TSMC) and AU Optronics Corp (AUO). In terms 1QFY15 operating profit breakdown, Malaysia (50%) was the largest contributor, followed by Taiwan (45%), Philippines and others (5%).
• Strong balance sheet. Earnings apart, Frontken’s 1QFY15 net cash has improved significantly to 3.5 sen/share from 2.9 sen/share in 2014 and 0.5 sen/share in 2013.
• Cautiously optiomistic of a better FY15. Management is optimistic that the strong financial performance will strengthen further into FY15, underpinned several positive factors including: 1) The sustained bullish semiconductor sector outlook, which will have a positive spillover effect on Frontken; 2) Contribution from its subsidiary TTES Frontken Integrated Services (an engineering service provider which also owns a licence to supply and provide services to Petronas group of companies), which Frontken acquired in May 2014; 3) Improving performance from its operation in Indonesia after securing licence from Special Task Force for Upstream Oil & Gas Business Activities in 2014 (SKK Migas, an institution established by the Indonesia government to manage Indonesia’s oil and gas natual resources).
• Short term bullish after downtrend line breakout. Prices closed above the short term resistance trend line from RM0.34 (21 May) on the back of heavy volume of 38m shares yesterday (11% higher against 6M average). This breakout is positive and could send prices higher in coming days, supported by bullish daily technical oscillators (RSI, MACD, slow stochastic and +DMI). Currently prices are sitting on the channel support near RM0.215 and as long as RM0.215 holds, further techncial bounce is likely.
• Short term resistances are RM0.265sen (daily mid bollinger band) and RM0.275 (38.2% FR), respectively. Long term upside target is RM0.30 (23.6% FR).
• Key supports are situated at RM0.235 (20-h SMA), followed by RM0.22 (100-d SMA). Cut loss at RM0.21 (a tad below uptrend line near RM0.215).

Source: Hong Leong Investment Bank Research - 19 Jun 2015