1Q22: Record Quarter On Strong Momentum; Guidance Raised
AEM achieved a very strong 1Q22 with net profit of S$40.8m, up both yoy (+205.6%) and
qoq (+4.3%), constituting 37% of our full-year target. This was achieved on sustained
momentum in revenue (+226% yoy, +15.4% qoq), mainly driven by the uptake in new
generation equipment and tools, and the consolidation of CEI which was acquired in
1H21. Management raised 2022 revenue guidance from S$670m-720m to S$700m-750m.
Maintain BUY with target price of S$5.60.
RESULTS
• 1Q22 above expectations. AEM Holdings’ (AEM) 1Q22 net profit of S$40.8m (+205.6%
yoy, +4.3% qoq) accounted for 37% of our full-year target. The strong showing came on the
back of sustained momentum in revenue of S$261.9m (+212.1% yoy, +3.9% qoq), mainly
driven by the uptake in new generation equipment and tools, and the consolidation of CEI
Limited, which was acquired in 1H21. All three segments were strong; consumables (+221%
yoy) comprised the largest segment at 45%, followed by test & automation equipment
(+371% yoy) at 34% and services (+123% yoy) at 21%.
• 2022 revenue guidance revised higher. Management now targets to achieve full-year
revenue of S$700m-750m, from S$670m-720m previously. This implies a revenue growth
rate of 24-33%, over the S$565.5m achieved in 2021. AEM’s revised targets came following
the affirmation provided by Intel (INTC US) on its 2022 revenue guidance during the recent
1Q21 results announced in late-April.
STOCK IMPACT
• Our positive view remains unchanged. We believe Intel’s IDM 2.0 strategy would benefit
AEM. Driving towards that strategy, Intel’s new fabrication plants (fabs) would drive demand
for AEM on new back-end testing equipment, while older fabs would contribute to steady
demand for AEM’s consumables and services as well as equipment upgrades.
• Rising probability of another upward guidance. With 1Q22 revenue now constituting 36%
of our full-year revenue and 35-37% of AEM’s target, we see a rising probability for a second
upward revision throughout the year.
EARNINGS REVISION/RISK
• No changes to our forecasts.
VALUATION/RECOMMENDATION
• Maintain BUY and target price of S$5.60. The target price is pegged to 2022 earnings of
15.6x, or +2SD to its historical five-year range, supported by a forward ROE of 25.6%. This
compares to the Singapore peer average forward PE of 10.1x and forward ROE of 20.6%.
The valuation peg is supported by the positive outlook for AEM from 2022 onwards and the
anticipated cyclical upturn of AEM’s business.
SHARE PRICE CATALYST
• Higher-than-expected revenue growth rates.
• Better-than-expected cost management.
• Earlier-than-expected integration synergies with CEI.