AEM: Caught in AI Selloff, CGS Keeps Bullish Call Despite Lower Target

THE CONTEXT

• The retreat in the AI trade, especially in the US, has hit Singapore’s semiconductor stocks hard, with AEM Holdings among those caught in the selloff.

It's down ~45% in the past month but still up ~260% year-to-date.

• CGS International’s 2 Nov report remains upbeat on the chip-testing equipment maker.

It forecasts 3Q net profit of about S$26 million—roughly 29X the low 3Q2025 base and 56% higher than 2Q2026.

• Analyst William Tng keeps its earnings forecasts and Add recommendation unchanged, but lowers his target price from S$14.79 to S$12.92.

His revised target values AEM at 30 times forecast FY2028 earnings, compared with 43 times FY2027 earnings previously.

AEM’s trajectory is heading up after its fabless AI/HPC customer -- (ie a chip designer that outsources manufacturing, which the market speculates to be AMD) became its largest revenue contributor in 1H 2026, overtaking Intel.

• Investors will keenly scrutinise AEM’s 3Q results which are expected on 11 Nov.

• Read excerpts of CGS's report below .....

Excerpts from CGS International report
Analyst: William Tng, CFA

The focus shifts to FY27-28F earnings

■ We expect AEM to announce its 3Q26F business update on 11 Nov 2026 after trading hours.

AEM
Share price: $6.20	Target: $12.92

■ We estimate net profit could rise 29x yoy and 56.4% qoq to c.S$26.0m in 3Q26F (net profit was a low S$0.9m in 3Q25).

■ We think investors' focus should shift to FY27-28F prospects for the company and the share price re-rating catalyst should revert to its earnings outlook.

3Q26F performance expected to be strong

We expect AEM to provide its 3Q26F business update after the market close on 11 Nov 2026.

We estimate net profit could be c.S$26m in 3Q26F, a 56.4% qoq improvement and a 29x yoy improvement as 3Q25 net profit was a low base of S$0.9m.

To recap, AEM had provided guidance in 1H26 results press release on 12 Aug 2026 that
a) FY26F revenue could be S$630m-680m, and
b) FY26F EPS could be S$0.245-0.275.

Summary	Dec-24A	Dec-25A	Dec-26F	Dec-27F	Dec-28F
Revenue (S$m)	380.4	399.3	682.4	758.8	890.1
Net Profit (S$m)	11.6	17.2	88.8	109.4	137.0
Normalised Attributable Profit (S$m)	11.6	17.2	88.8	109.4	137.0
Normalised EPS (S$)	0.04	0.05	0.28	0.34	0.43
Normalised EPS Growth	(55%)	47%	411%	23%	25%
FD Normalised P/E (x)	199.6	136.1	26.5	21.7	17.3
Price To Sales (x)	6.13	5.85	3.47	3.12	2.66
DPS (S$)	0.00	0.01	0.07	0.09	0.11
Dividend Yield	0.00%	0.17%	0.94%	1.15%	1.45%
Norm EPS/consensus EPS (x)	—	—	1.06	0.91	0.87

Sources: CGSI Research, company reports

Investors will be looking for FY27F guidance

We believe investors would be looking for any early indications of AEM's FY27F outlook.

Historically, AEM has provided full-year revenue guidance for the current financial year at either of two points: as early as January, or alongside the announcement of the previous year's full-year results in late February.

From an investor relations perspective, for AEM to issue FY27F guidance would be a positive though the company could be constrained by practical realities as customers may choose to issue orders later into 4Q26F or 1Q27F.

Investors would also want updates on the order potential from its memory customer in FY27F and whether there could be new orders from its PC/Foundry customer.

For FY26F, our assumption is that there may not be any significant upward revision to the current FY26F revenue guidance as

a) AEM has already mentioned that some of its order backlog should flow into 1Q27F, and

b) there are constraints/shortages along AEM's supply chain.

TP driver shifts from P/E multiple to earnings outlook

We keep our Add call, backed by our forecast FY25-28F EPS CAGR of 100.3% and rollover to FY28F.

williamtng4.14 William Tng, CFA, analystWe previously valued AEM at S$14.79, based on 43x FY27F EPS, 1 s.d. above FY24-26F average P/E reflecting the strong sentiment in Artificial Intelligence (AI) plays then.

We believe valuations are normalising and AEM's ability to deliver earnings growth into FY28F now comes to the fore.

Hence, our TP is now based on 30x FY28F (FY23-26F average) P/E, i.e. S$12.92.

Higher valuation would rest on strong FY27-28F guidance.

Re-rating catalysts:

1) key customer taking earlier delivery of equipment orders, and

2) new customers accelerating equipment purchase orders.

Both should lift revenue leading to higher net profit.

Downside risks: further delays and/or cancellation of customers’ orders, and slower global economic growth reducing customer demand for AEM’s contract manufacturing subsidiary.

AEM also faces a lawsuit from a competitor.

As this lawsuit involves patents related to a specific wafer level test system that is not practised by AEM, we think the legal expenses impact is minimal unless there are further developments.

AEM: Caught in AI Selloff, CGS Keeps Bullish Call Despite Lower Target

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