AEM Holdings - Maybank Kim Eng 2020-03-29: Guidance Maintained

AEM HOLDINGS LTD (SGX:AWX) | SGinvestors.io AEM HOLDINGS LTD (SGX:AWX)

AEM Holdings - Guidance Maintained


Strong earnings visibility; Maintain BUY

  • AEM Holdings (SGX:AWX) has the strongest FY20E earnings visibility within our Singapore tech coverage.
  • Despite AEM’s Penang factory being closed through the movement control order in Malaysia from 18-Mar to 14-Apr, full year sales guidance of SGD360-380m is unchanged. As demand drivers appear intact, we believe a key earnings risk is if global supply chain disruptions result in any unforeseen components shortages.
  • Maintain BUY and ROE- g/COE-g Target Price of SGD2.82 (3x blended FY20-21E P/B).



Guidance kept; Intel deliveries > 90% on time

  • On 19-Mar, AEM announced that its sales guidance of SGD360-380m for FY20 is unchanged. Further, AEM introduced 1Q20 sales guidance of a record SGD135-145m, and is cautiously confident that 1H20 will be an all-time high despite some shifts in the delivery of its sales orders due to the Covid-19 situation.
  • On 20-Mar, key customer Intel highlighted that it is delivering more than 90% of its chips on time. This is consistent with Intel’s early March message that operations are “relatively normal”.


Robust balance sheet and solid cash generation

  • AEM’s balance sheet is robust with net cash to equity of 80%. Strong cash generation is driven by high profitability and working capital efficiency. Since 2017 (ramp-up of HDMT test handlers), cash conversion cycle has been around 15 days or less.
  • Intel has also kept a tight range for its days of payables outstanding (~40-50 days), even throughout the GFC, suggesting it is a good paymaster.


Accumulate on dips



Read also






Lai Gene Lih CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-03-29
SGX Stock Analyst Report BUY MAINTAIN BUY 2.820 SAME 2.820



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