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Analysts pleased with AEM Holding’s new order win; Maybank upgrades call to ‘buy’ at higher TP

Douglas Toh
Douglas Toh • 3 min read
Analysts pleased with AEM Holding’s new order win; Maybank upgrades call to ‘buy’ at higher TP
The company's new order win has inspired a brighter outlook amongst analysts. Photo: AEM Holdings
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Following a company update, Maybank Securities has upgraded its call on AEM Holdings AWX -

to “buy” from “hold”, with an increased target price of $2.78 from $2.13 previously, while DBS Group Research has kept its “hold” call and target price of $2.26 unchanged.

In his April 3 report, Maybank’s Jarick Seet attributes his upgraded call to the company’s high volume order by a major fabless provider of high-performance compute (HPC) and artificial intelligence (AI) semiconductor chips, which he expects to contribute to at least $24 million or 5% of FY2024 revenue.

“This will address the emerging test needs for the customer's new device roadmap and will commence delivery in FY2024, with further deliveries expected in the following years,” writes Seet.

He adds: “In addition, we expect its core customer to increase orders in 2HFY2024 based on our channel checks as other suppliers are getting encouraging forecasts for 2HFY2024. As a result, we think the worst is over for AEM and raise our FY2024 revenue and profit after tax and minority interests (patmi) by 24% and 50%, respectively.”

The analyst also notes that the new order lifts AEM’s FY2024 and 2HFY2024 guidance significantly, which was previously “downbeat” with a 1HFY2024 revenue guidance of only $170 million to $200 million, due to uncertainties for new product ramps.

Overall, Seet is encouraged by the update, adding that his latest channel checks has revealed AEM’s main customer has provided a more bullish 2HFY2024 forecast to its suppliers, which he believed AEM could potentially benefit from.

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“We believe that the worst should be over and while the upcoming 1QFY2024 should remain weak, we expect a better outlook could potentially rerate the stock upwards and most negative news would have been priced in,” concludes the analyst.

Upside factors noted by Seet include revenue expansion from securing new customers or increased orders from existing customers, synergistic and accretive acquisitions as well as positive customer-related news flow that could catalyse improved orders for AEM.

Conversely, downside risks include order cancellations, delays and earnings misses, emerging technology from rivals that could erode AEM’s competitive position with customers, and lastly, an erosion in competitive advantages of core customers as a result of company-specific or industry-related developments. 

See also: Analysts continue to like Yangzijiang Shipbuilding following positive order book momentum

Meanwhile, although the team of analysts at DBS is similarly positive on the company’s new order win, they await more updates before making any changes to their call or estimation.

They write: “Although the size of the order win is undisclosed, we believe that this is a step in the right direction in meeting its aim of growing revenue from new test insertion wins by more than five times from low double-digit millions in FY2023 to triple-digit millions in FY2025.”

“The new order win offers some ground for optimism, but we prefer to stand on the sidelines for now as the limited details make it challenging to assess and quantify the opportunity from the new order wins,” adds the team at DBS.

Additionally, they note that the near-term “remains cloudy” due to the uncertainties in ramp timings and the pace of the semiconductor industry’s recovery. 

As at 11.35 am, shares in AEM Holdings are trading at three cents higher or 1.27% up at $2.39.

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