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3Q21 in line; Management raises revenue guidance by 6-14%

  • 3Q21 net profit in line with our expectations
  • Volume ramp-up for its next generation of handlers has begun
  • Selected to be the SLT solutions supplier for a leading memory IDM
  • Management has raised FY21F revenue guidance by 6-14% to S$525-550m, in line with our forecast of S$548.6m
  • We currently have a BUY recommendation and TP of S$4.98

Financial Results

S$’m3Q213Q20y/y %2Q21q/q %
Revenue146.2161.8-9.7%112.0+30.5%
Profit Before Tax27.829.9-7.0%19.6+42.0%
Net Profit23.324.3-4.3%16.4+42.5%
Net Profit Margin15.9%15.0%+0.9ppts14.6%+1.3ppts
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Key Operational Updates

  • The volume ramp up for its next generation of handlers has begun. The ramp up is expected to continue into FY22F.
  • Selected to be the System Level Test Solutions supplier for one of the industry’s leading memory integrated device manufacturers.
  • Raised FY21F revenue guidance by 6-14% to S$525-550m, from S$460-520m.

Our Thoughts
3Q21 earnings are in line with our expectations as ramp up begins. The semiconductor industry momentum remains strong and industry data and developments continue to point towards a strong multiyear trend. Semiconductor companies are rushing to innovate and add manufacturing capacity to ride on the secular uptrend. We were early to iterate our view that the semiconductor shortage is a positive sign for the industry and semiconductor service-providing companies such as AEM are one of the beneficiaries. 
AEM’s key customer, Intel, has significantly increased its capex commitments (FY21F: US$18-19bn and FY22F: US$US$25-28bn). As the capex is usually FIRST spent on building new facilities and front-end equipment, delays in flowthrough are expected. The volume ramp-up that we have been waiting for has arrived, and we believe that it could be significant. The last time Intel increased its capex by c.20-30% from 2016-2018, AEM experienced an 18/60% growth in its revenue in FY19/20. Management has raised their FY21F revenue guidance which is in line with our revenue forecast of S$548.6m.
US 3-month Semiconductor Equipment Billings

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We currently have  BUY recommendation and TP of S$4.98. More updates after the results briefing with management later.