AEM: What Maybank expects of 2Q2021 performance & beyond

Company

2Q21E PATMI range

Basis for 2Q21 estimate/ Thesis/ Risks

AEM

SGD14-16m (-22% YoY at midpoint)

Basis: We expect 2Q21 to be sequentially stronger than 1Q21 (PATMI: SGD13.2m).

Upside drivers: We believe stronger than expected cloud spending recovery, and/ or materially accretive M&As are upside drivers in 2H21 and beyond.

Risks: As AEM has reiterated that new generation of HDMT equipment will undergo production ramp-up in late 3Q21 through 2022, we do not see demand as the key risk as we enter a new earnings cycle. Rather, we see any unforeseen supply side bottlenecks as the key risk.

From a stock trading perspective, AEM has gained 20% since it bottomed out in mid-May. We do not rule out profit taking in the near term, especially if the market perceives 2Q21 results to be a non-event, or if 2Q21 results disappoint. We would recommend buying on dips if our thesis remains intact.