The Monetary Authority of Singapore’s (MAS) Equity Development Program (EQDP) is now in full swing. Amova Asset Management (AAM), one of the appointed fund managers, has recently increased its stake in this Singaporean mid-cap chip company.

AAM increased its stake in Frencken from 5.88% to 6.11%, with a SG$2.6 million purchase of its shares. The share price has experienced a mini-slump since the end of May and thus presents an attractive entry point for investors looking to grab it.

Let’s take a look at Frencken and understand what AAM sees in it.

Frencken offers end-to-end technology design and manufacturing solutions to its customers in the aerospace, analytical life sciences, automotive, healthcare, industrial and semiconductor industries. In simple terms, it designs and makes complex electronic, electrical, and mechanical systems according to what its customers want, and ships them. Here is a visual of what kind of services they provide.

Semiconduct clients make up the bulk of its revenue at 49% in 2025, followed by life sciences (19%), medical (15%), automotive (7%) and industrial automation (5%). Frencken’s business units can be broadly divided into two: mechatronics (90% of revenue) and APS.

Revenue improved by 8.9% to SG$865 million in 2025, driven mostly by its mechatronic division. Mechatronics revenue grew by 10.2% and is currently benefiting from the AI boom. Its semiconductor segment is up by 16.7%, and makes up more than half of its revenue. The biggest jump came from the industrial automation segment, which grew by 48%, due to higher orders from a data storage solutions client. Profits are only up by 5.4% to SG$39 million.  Frencken incurred higher cost growth for selling and distribution (+11.3%) and administration & general (+9.7%) due to manpower, transportation, and software expenses. 

In the past five years, revenue has grown at a stable annual rate of 3.1%, but profits have generally declined as the previous technology cycle ended, and a new one is emerging.

This is what AAM probably saw. Share price declined from SG$3.29 on 29 May to SG$2.86 on 6 June, and represents an attractive entry point right now.

Frencken is currently trading at a price-to-earnings ratio of 31.3 times, which is higher than the industry average of 25.7 times but lower than its historical average of 70 times from 2023 to 2025. While it’s tempting to invest based on this, what are the reasons to support a recovery in share price in the next few months?

According to Gartner, the global semiconductor industry is projected to grow by 64% in 2026 and 17.8% in 2027. Frencken could benefit from a second-order effect through its semiconductor clients receiving higher orders from AI players. Its services are considered as ‘shovels’ where it produces critical components, modules and assemblies across the chip supply chain. In 2025, it saw higher production run-rates to fulfil customer orders for existing and new products as they seek to build up their inventories again.

Analysts in the market do see Frencken's share price recovering back to the SG$3.30 level, with an average target price of SG$3.33 and an implied upside of +16.4%. 

Frencken is currently trading at higher valuations compared to its peers, with a price-to-book ratio of 2.6 times compared to the local industry average of 2.0 times. However, global peers do trade at more expensive  valuations

Source: Shareinvestor

Frencken represents a proxy to the global AI boom industry, and recent share price declines present an attractive entry point.

Investors who want to take advantage of short-term undervaluation could take a good look at this AI shovel.