Excerpts from Maybank KE report

Analyst: Gene Lih Lai

Just a speed bump
Focus on FY22E recovery; BUY
1Q21 PATMI of SGD13.2 (-63.4% YoY) was weak as expected, due to an exceptionally high 1Q20, and cyclical softness ahead of volume ramp for new generation test handlers.


Share price: 


We cut FY21E EPS by 23% to factor in margin dilution from CEI, but raise FY22E EPS by 4% to factor in our optimism of earnings recovery.

Our TP is now higher at SGD5.56, as we roll forward to 14x FY22E P/E (prev: 14x FY21E) as we believe investors should focus on the recovery potential instead of transitory weakness. BUY.

Test graphic1.21

Volume ramp for next gen test handlers in 2H21
1Q21 revenue fell 45.3% YoY, as Intel’s demand for equipment and consumables drove an exceptionally strong 1Q20 and FY20.

Our FY21E revenue of SGD518m is at the higher end of SGD460-520m guidance.

1H21 revenue YoY 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.

Diversification efforts bearing fruits
AEM expects to derive meaningful revenue from 10 out of the top 20 semiconductor companies (spanning mobility, memory and high performance computing) in FY22. This is positive as it validates the proposition of AEM’s SLT solutions as advanced packaging technologies become increasingly mainstream.

This is important, in our view, as it should help investors transition their view of AEM from being just an “Intel-focused” play into a truly “system level test” play, properly leveraged to heterogeneous packaging – which in turn rides on significant trends in HPC, 5G/AI, mobility and so on.

We expect YoY growth to revert in 4Q21
Lai Gene LihGene Lih LaiAs our concerns for cyclical softness have now materialised, and because we see this as transitory, we believe investors should focus at the realignment of cyclical recovery alongside structural growth momentum of AEM’s growth story.

Following this set of results, we believe street might cut TPs, which may introduce further short-term volatility.

We would accumulate on any dips, as we believe AEM should revert to YoY growth in 4Q21.

Full report here. 

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