Goldman Sachs raised its target price for Frontage Holdings (01521) to HK$4.24 from HK$3.71 and maintained its "buy" rating.
The research house said Frontage's earnings of US$9.3mn were above Goldman's estimates with one-off US tax benefits, while revenue of US$49.7mn was slightly below expectations, with softer China operation due to capacity constraints for bioanalytical services and ramp-up of new business (e.g., DMPK).
Goldman expects China revenue to accelerate in 2H 2019/2020 with ongoing capacity expansion in Shanghai site. US sales accelerated, driven by enhanced capability in capturing emerging demand for biologics/biomarker BA services and turnaround of Concord.
With US$87mn backlog by 1H, Goldman sees strong earnings' visibility over the next 12 months, with potential upside from expanding service offerings.
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