KUALA LUMPUR: Frontken Corp Bhd is expected to deliver a robust underlying second quarter (Q2) 2025 performance driven by favourable forex trends and sustained strong demand from its key Taiwanese clients, said Hong Leong Investment Bank Bhd (HLIB).

HLIB noted that currency is less of a drag now, as the Taiwan Dollar has appreciated against the Ringgit by four per cent quarter on quarter (QoQ) in Q2 2025.

It said this bodes well for Frontken's key subsidiary, Ares Green Tech Corp (AGTC), which primarily bills its customers in Taiwan dollars.

"This contrasts with other listed Malaysian peers in the technology sector, who are affected by the stronger ringgit due to their US dollar-based export sales.

"Having said that, we understand that Frontken is holding approximately US$30 million in cash (previously intended for a potential US acquisition), which could result in up to RM10 million of non-core, unrealised forex losses in Q2 2025," it said.

Looking ahead, HLIB remains optimistic about Frontken's prospects, citing tailwinds from the global expansion of semiconductor fabrication plants, particularly in the US, Singapore, and India.

Despite the strong outlook, the research house cautioned that a potential 32 per cent increase in share base from warrant conversion (due May 2026) could weigh on the stock's near-term upside.

HLIB is keeping a Hold stance on Frontken with an unchanged target price of RM4.00.

"We remain positive on Frontken's growth prospects, underpinned by structural semiconductor tailwinds from AI-driven demand, ongoing migration to leading-edge nodes, and robust foundry capex spending," it added.