A strong start to FY22
? 1QFY9/22 results were in line at 25% of our full-year net profit forecast.
? We see a stronger 2HFY9/22F, driven by healthy order book replenishment, new testers launches and expansion into mixed signal tester market.
? Reiterate Add with a lower RM1.30 TP to reflect dilution from PP and lower P/E multiple of 31.5x, still based on Malaysian ATE mean.
Core net profit in 1QFY22 jumped 7.2x yoy
1QFY9/22 revenue rose 62% yoy to RM18.6m, a new record quarter, driven by higher contributions from all testers segments – mobile and tablet, data centre, automotive and CMOS image sensors (CIS). We estimate the group’s utilisation rate rose from 87% in 4QFY21 to 93% in 1QFY22. The stronger sales were mainly driven by higher contributions from the China market, which made up 53% of Aemulus’ revenue in 1QFY22. As a result of higher operating leverage, EBITDA margin expanded 16.5% pts yoy to 30.5% in 1QFY22. Stripping out exceptional items, such as fair value gain on derivative and sales of intellectual properties, Aemulus registered a significantly higher RM4.5m core net profit in 1QFY22 against RM621k core net profit in 1QFY21.
Healthy order book and new products pipeline driving growth
We gather from management that Aemulus’s order book is hovering between RM45m to RM50m as at 8 Feb 22. This is mainly driven by robust demand for radio frequency (RF), RF filter, automotive and CIS testers. The group expects to start delivery of the first few units of its new 5600-CIS tester in 2QFY22F. This will be part of an 80 CIS testers contract worth RM20m that was secured in 2021. In addition, the group also plans to launch the updated version of its RF and RF filter tester utilising 100% local content with in-house IP design. This is part of the group’s strategy to increase the local content of its testers portfolio in order to participate in the Made in China 2025 initiative.
New plant expansion will raise production capacity by 50%
Aemulus raised about RM63.7m through a private placement (PP) following the issuance of 60.7m new shares at RM1.05/share in mid-Dec 21. The group plans to utilise the proceeds for its capacity expansion plan at Aemulus Base, research & development (R&D), additional investment in its China joint venture, TMSS Technology, repayment of borrowings and working capital requirement. We gathered from management that new capacity expansion at Aemulus Base, Bayan Lepas, could increase the group’s production capacity by 50% by 1QCY23F.
Reiterate Add with a lower RM1.30 TP
We revise down our EPS to reflect the dilution from new share issuances. Reiterate our Add rating on the stock with a lower RM1.30 TP, based on a lower 31.5x CY23F P/E (vs. 33x previously), as we update our target P/E multiple to reflect the weak sentiment in the global tech sector arising from concerns over interest rate hikes. However, we still peg our valuation to Malaysian Automated Test Equipment (ATE) sector historical mean P/E.