AEM Holdings - CGS-CIMB Research 2020-05-19: Progress In Diversification

AEM HOLDINGS LTD (SGX:AWX)

AEM Holdings - Progress In Diversification

UTAC and AEM have announced a partnership to develop test solutions for complementary metal-oxide-semiconductor (CMOS) image sensors.
We view the partnership as being incrementally positive for AEM’s efforts to diversify its revenue stream.

According to eeNews Europe (18 May 2020), Singapore-based semiconductor assembly and test services provider UTAC Holdings Ltd has teamed up with AEM Holdings (SGX:AWX) to develop next-generation, cost-effective test system solutions for CMOS image sensor products.
According to the partnership, CMOS image sensor sales are estimated to grow significantly, driven by demand from applications in the areas of security, automotive safety, autonomous vehicles and industrial.
Through this collaboration, the partnership will create application-specific test solutions that will provide semiconductor companies with cost-effective solutions that are scalable and adaptable for future product lines.

As at end-1Q20, non-Intel revenue was 2% of AEM’s total turnover.
We view this partnership as incrementally positive with AEM making further progress in diversifying its revenue stream.

Our Target Price is unchanged at S$3.58 (still based on Gordon Growth-derived P/BV multiple of 4.86x).
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Re-rating catalysts are further increases in FY20 revenue guidance and better-than-expected profit margins.
Downside risks are further delivery delays due to lockdown/movement restriction extensions.

William TNG CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-05-19

SGX Stock Analyst Report ADD MAINTAIN ADD 3.580 SAME 3.580