AEM Holdings - CGS-CIMB Research 2021-08-06: ADD Into FY22; Temasek To Be The Single Largest Shareholder

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AEM HOLDINGS LTD (SGX:AWX)

AEM Holdings - ADD Into FY22; Temasek To Be The Single Largest Shareholder

• AEM’s 1H21 results were weaker y-o-y, as guided by the company earlier. 1H21 core net profit was below expectations at 28.1%/31.6% of our/Bloomberg consensus full-year forecasts.
• Reiterate ADD on AEM with lower S$4.61 target price (now based on 13.4x CY22F P/E) to reflect the revision to our earnings forecasts and its higher share base.

1H21F weaker y-o-y as guided by AEM

• In its 1Q21 business update in May 2021, AEM (SGX:AWX) guided that 1H21F results would be weaker y-o-y. In line with this guidance, 1H21 revenue was 29.8% lower y-o-y (S$192.3m) and net profit was 46.6% lower y-o-y (S$29.5m). 1H21 core net profit was below expectations at 28.1% of our and 31.6% of Bloomberg consensus full-year forecasts.
• An interim dividend of S$0.056 was declared by AEM, in line with its 25% payout policy.

AEM expects growth to return in FY22F

• AEM maintains its FY21F revenue guidance of S$460-520m, with demand for a new generation of equipment expected to be strong from late-3Q21F and into FY22F. Hence, it keeps its guidance for a stronger 2H21F vs 1H21.
• Besides a stronger 2H21F, another possible re-rating catalyst in 2022F could be customer diversification success. Its slew of technology acquisitions and in-house R&D is bearing some results, leading the company to have engineering engagements with 10 out of the top 20 semiconductor companies. If discussions are successful, AEM believes there could be potential for volume production in FY22F. These plans remain on track, according to its 1H21 results commentary.

Adjusting forecasts for CEI acquisition impact

• As of 30 Jun 2021, AEM has acquired 100% of CEI Limited (SGX:AVV)’s total number of shares outstanding (less treasury shares) also increased to 282m from 275.6m previously.

Reiterate ADD on AEM

• As we expect earnings growth to return target price for AEM is lowered slightly to S$4.61 due to the combination of earnings adjustments and the higher share base.
• See
  • AEM's Share Price,
  • AEM's Target Price,
  • AEM's Analyst Reports,
  • AEM's Dividend History,
  • AEM's Announcements,
  • AEM's Latest News.
• Potential re-rating catalysts are possible upward revisions to revenue guidance in the coming months.
• Downside risks are delivery delays due to lockdowns/movement restriction extensions, loss of competitiveness by its key customer, and aggressive competitive response from its competitor.

AEM (SGX:AWX) To Raise S$103.1mil In Private Placement To Temasek.

Posted by SGinvestors.io on Thursday, August 5, 2021.

AEM's new major shareholder - Temasek

• AEM is placing 26.8m new report attached below shows the potential impact to our target inorganic opportunities. In this scenario, our target price for AEM could fall to S$4.05 due to the dilution from the new shares.

William TNG CFA CGS-CIMB Research | https://www.cgs-cimb.com 2021-08-06

SGX Stock Analyst Report ADD MAINTAIN ADD 4.61 DOWN 4.630