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With strong growth momentum, AEM 'graduates' from Centurion to Billion Dollar Club

The Edge Singapore
The Edge Singapore • 3 min read
With strong growth momentum, AEM 'graduates' from Centurion to Billion Dollar Club
One of the hottest stocks lately, AEM Holdings has bagged all four awards in the equipment; telecommunication services industry.
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One of the hottest stocks in recent years, AEM Holdings has made a rare clean sweep of all four awards up for grabs in the technology equipment; telecommunication services industry sector. It won for best returns to shareholders, fastest growth earnings, best weighted ROE, and naturally, it has been named the overall sector winner as well.

At last year’s Billion Dollar Club, AEM Holdings (AEM) was still competing in the Centurion awards — its market then was below $1 billion.

It is worth noting that AEM Holdings was the overall Centurion winner last year. Back then, the company’s growth momentum was already immensely palpable and with the kind of trajectory no matter how one slices and dices it, there is no surprise that AEM Holdings has entered the Billion Dollar Club. What was unexpected was that its growth was so strong that it scooped up all four awards.

Furthermore, with an overall score of 73.4%, AEM was the second-highest scoring company among all Billion Dollar Club winners. Top Glove, the world’s largest glove maker, led the entire pack with a total score of 87% — thanks to the supranormal earnings growth as the world’s healthcare and medical professionals turn to rubber gloves as an essential kit of their personal protection equipment.

See also: CGS-CIMB lifts AEM Holdings' TP to $4.78 on initial success in customer diversification

In FY2020 ended last December, as the demand for semiconductors surged, AEM —which provides testing services to its key client Intel Corp — pleasantly surprised investors with multiple rounds of upward revision of its revenue guidance.

In the three years taken into consideration, AEM grew its earnings by a CAGR of 44.7%. Its return to shareholders was 33.9% CARG; and its weighted ROE was a whopping 51.46 times, higher than any other company in the Billion Dollar Club. Glove maker Riverstone Holdings, which was enjoying outsized gains of its own, had the second most ROE at 39.23 times.

The company’s sterling performance can be attributed to its strong position providing a vital service, testing, to the fast-growing semiconductor industry.

AEM’s fortunes stand in stark contrast to less than a decade ago when chairman Loke Wai San, who runs a private equity firm, took a controlling stake in the then floundering company.

He promptly set the ship straight and invested and helped bring about the capabilities to build the base for the strong growth AEM is now experiencing.

Its most recent earnings for 1HFY2021 ended June might have been weaker than some analysts were expecting, given the high-base effect from a trailblazing 2020. Before inves- tors could digest and cast negative views on the stock, AEM announced that Temasek Holdings will become its single-largest shareholder by taking up a placement of shares worth more than $100 million.

With this addition to its war chest, AEM can then speed up its bid to acquire additional new capabilities and capture a growing share of the market.

Cover image of Loke Wai Sun: Albert Chua/The Edge Singapore

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