AEM HOLDINGS LTD (SGX:AWX)
AEM Holdings - Just A Speedbump
Focus on FY22E recovery; BUY
- AEM (SGX:AWX)'s 1Q21 PATMI of S$13.2 (-63.4% y-o-y) was weak as expected, due to an exceptionally high 1Q20, and cyclical softness ahead of volume ramp for new generation test handlers.
- We cut AEM's FY21E earnings per share forecast by 23% to factor in margin dilution from CEI (SGX:AVV), but raise AEM's FY22E earnings per share forecast by 4% to factor in our optimism of earnings recovery.
- Our target price for AEM is now higher at S$5.56, as we roll forward to 14x FY22E P/E (previously: 14x FY21E) as we believe investors should focus on the recovery potential instead of transitory weakness.
- BUY.
Volume ramp for next generation test handlers in 2H21
- AEM's 1Q21 revenue fell 45.3% y-o-y, as Intel’s demand for equipment and consumables drove an exceptionally strong 1Q20 and FY20. Our FY21E revenue forecast of S$518m is at the higher end of S$460-520m guidance.
- 1H21 revenue y-o-y is expected to be lower, and AEM expects strong recovery in 2H21 into 2022 as next generation tools – catered for high-performance computing (HPC) – enter volume production.
AEM's diversification efforts bearing fruits
- AEM expects to derive meaningful revenue from 10 “Intel-focused” play into a truly “system level test” play, properly leveraged to heterogeneous packaging – which in turn rides on significant trends in high-performance computing (HPC), 5G/AI, mobility and so on.
We expect y-o-y growth to revert in 4Q21
- As our concerns for cyclical softness have now materialised, and because we see volatility. We would accumulate on any dips, as we believe AEM should revert to y-o-y growth in 4Q21.
- See
Gene Lih Lai CFA
Maybank Kim Eng Research
|
https://www.maybank-ke.com.sg/
2021-05-04
SGX Stock
Analyst Report
5.56
UP
5.050
