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CIMB: AEM Holdings Ltd – Add Target Price $3.76

Posted on October 20, 2022October 20, 2022 By alanyeo No Comments on CIMB: AEM Holdings Ltd – Add Target Price $3.76
FY22F revenue guidance raised
  • AEM has raised its FY22F revenue guidance upwards to S$820m-850m from S$750m-800m previously.
  • Reflecting this new revenue guidance, we raise our FY22F revenue forecast by 6.3%, leading to an 8.2% increase in our FY22F EPS forecast.
  • Reiterate Add on AEM given its positive long-term prospects.
FY22F revenue raised to between S$820m and S$850m

On 14 Oct 2022, AEM revised its FY22F revenue guidance upwards to between S$820m and S$850m. Its previous revenue guidance for FY22F was between S$750m and S$800m. We understand that the increase in revenue guidance was due to rising demand from existing and new customers for its semicon business.

Analysts briefing – key highlights

AEM hosted a briefing for sell-side analysts covering the stock on Monday, 17 Oct. In our view, the demand for AEM’s test handlers is likely to be impacted in FY23F as its major customer Intel reassess its capex in the face of weaker end market demand – hence our assumption of order deferments in our earlier report. AEM remains confident of the long-term demand for its test handlers as testing complexity grows. Management believes AEM will be able to participate in the growing trend towards system level testing with its own complete solutions. Depending on the operating environment in FY23F, AEM will manage its cost structure to deal with the revenue volatility. We note that in FY18 When AEM guided for dim visibility into FY19, management adopted the strategy of proactively managing its fixed costs in line with the volatility in its business.

FY22F EPS raised by 8.2%

Reflecting AEM’s new revenue guidance, we raise our FY22F revenue forecast upwards by 6.3% to S$850m, leading to an 8.2% increase in our EPS forecast. Against our revised FY22F EPS forecast, we now expect AEM to post a 6.5% yoy decline in EPS in FY23F.

Reiterate Add

We think AEM’s strength in system level test (handlers and complete testing solutions) remains intact, hence its long-term prospects remain strong; reiterate Add. We value AEM at 9.7x (0.5 s.d. above its 6-year average) on our FY23F EPS forecast. There is no change in our valuation basis. Re-rating catalysts are stronger-than-expected orders from its major customer and earlier-than-expected success in securing orders from other potential customers. Downside risks are delivery delays and the loss of its sole supplier status for its major customer, which will negatively affect AEM’s profitability.

AEM-1Click here to Download Full Report in PDF

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