Excerpts from CGS-CIMB report

Analyst: William Tng, CFA

Record 1Q20F on the cards!

AEM announced that its FY20F sales guidance of S$360m-380m is unchanged despite the recent Covid-19 developments. 


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■ It is cautiously confident it can achieve strong sales in 1H20 despite the shift in delivery of sales orders; AEM guides for 1Q20F sales of S$135m-145m.

■ Key customer Intel is maintaining above-90% on-time delivery of products. Reiterate Add and TP of S$2.71.

BCP activated; FY20F sales guidance intact
● AEM has announced that in response to the Covid-19 outbreak, the company has activated its business continuity plan (BCP) across its operations and supply chain.

● Measures being adopted include travel restrictions, compulsory temperature checking, advisory on personal hygiene, working in shifts at different sites or from home, and ordering materials from alternative sources.

● Despite the recent Covid-19 developments, AEM reiterated its FY20 sales guidance of S$360m-380m provided earlier on 25 Feb 2020.

AEM remains cautiously optimistic on 1H20 sales

1H20 record

williamtng4.14AEM is cautiously confident that its 1H20F sales could reach a record high despite some shifts in the delivery of its sales orders arising from the Covid-19 situation."

-- William Tng, CFA (photo)
analyst, CGS-CIMB

● AEM is cautiously confident that its 1H20F sales could reach a record high despite some shifts in the delivery of its sales orders arising from the Covid-19 situation.

● The company also guided that it expects to report a record 1Q20F sales of S$135m145m.

At the top end of its guidance for both 1Q20F/FY20F, 38% of its sales guidance will be achieved in the first quarter, in our view.

Key customer Intel maintaining >90% on-time product delivery
● In a letter posted on its website yesterday, Intel said that it is maintaining above-90% on-time delivery of its products from factories worldwide.

● Intel said that while the Covid-19 outbreak remains a developing situation, its factories around the world continue to operate on a relatively normal basis as the company is working closely with local and national governments to help ensure worker safety while allowing critical operations to continue.

Reiterate Add and TP of S$2.71

● We reiterate our current Add call and TP of S$2.71, based on an unchanged Gordon growth-derived P/BV multiple of 4.05x.

● If our FY20F revenue forecast of S$400m cannot be met but the company’s guidance of S$380m revenue is, our Gordon growth-derived P/BV multiple falls to 3.97x (S$2.62 per share).

● The valuation low to watch out for is S$1.225.

● Potential order cancellation is a downside risk while stronger orders/new customer wins are upside risks.

Full report here

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