Excerpts from Maybank KE report

Analyst: Gene Lih Lai 

Decent runway ahead
Investment case: beneficiary of rising SLT relevance
We see AEM as a beneficiary of system level test adoption (SLT), as we believe SLT is increasingly relevant due to advanced packaging technology and shrinking transistor sizes.


Share price: 


We also believe the current pullback in share price as an opportunity to accumulate as we see 1H21 earnings weakness as transitory.

We also see Intel’s IDM2.0 strategy as an underappreciated catalyst for AEM, contingent on Intel’s strong execution.


Catalysts: earnings recovery in 2H21 into 2022
Catalysts are:

i) resumption of YoY earnings growth in 4Q21 into 2022 – as AEM rolls out new generations of HDMT test handlers, which cater for high-performance computing;

ii) meaningful revenue contributions from 10 out of top 20 semiconductor customers globally – which infers that AEM’s solutions are gaining traction outside of Intel; and

iii) Intel’s front-end capacity expansion and IDM2.0 strategy - which should eventually benefit back-end suppliers such as AEM.

Valuations: revenue diversification could narrow gap
Our TP is based on 14x FY22E P/E, as we believe investors should focus on the realignment of cyclical and structural factors, rather than transitory weakness in 1H21.

On FY21E basis, AEM is trading at 13x P/E.

For comparison, Singapore-listed tech stocks/ global test-handler peers/ global back-end equipment peers are trading at 15x/18x/25x FY21E P/E.

As AEM continues to diversify revenues, we see potential for the valuation gap to narrow.

Key customer’s market share is key risk
Lai Gene LihGene Lih Lai, analystThus far, we believe AEM’s Malaysia production is not materially affected by the 60% worker cap placed by the government during tightened MCO and lockdown.

However, a significant worsening of the Covid-19 situation in Malaysia may be a key risk to this.

Longer term, we believe Intel’s market share is a key risk to observe as this likely influences chip volumes that are tested using AEM’s equipment.

Share Prices

Counter NameLastChange
AEM Holdings4.180-0.070
Avi-Tech Electronics0.395-
BH Global0.260-
China Sunsine0.490-0.010
Food Empire0.760-0.010
Fortress Minerals0.365-0.025
Golden Energy0.290-0.015
GSS Energy0.073-0.004
ISDN Holdings0.645-0.030
IX Biopharma0.225-
KSH Holdings0.350-
Leader Env0.079-
Medtecs Intl0.370-0.055
Moya Asia0.065-0.001
Nordic Group0.355-
Oxley Holdings0.200-0.010
REX International0.189-0.010
Southern Alliance Mining0.960-0.030
Sri Trang Agro1.340-0.050
Straco Corp.0.4750.005
Sunpower Group0.625-0.010
The Trendlines0.100-0.002
UG Healthcare0.345-0.060
Uni-Asia Group1.050-0.050
Wilmar Intl4.080-0.030
Yangzijiang Shipbldg1.440-0.040
Yinda Infocomm0.215-0.005

NextInsight RSS

rss_2 NextInsight - Latest News

Online Now

We have 1315 guests and no members online