As AEM Holdings see record earnings and revenue of $97.6 million and $519.0 million respectively for the FY2020 ended December, analysts from CGS-CIMB Research, DBS Group Research and Maybank Kim Eng have recommended investors to continue accumulating the stock.

CGS-CIMB analyst William Tng has maintained “add” on AEM with an unchanged target price of $4.63 as the company’s results stood in line with the brokerage’s as well as Bloomberg consensus’ expectations.

Tng has also noted that AEM’s strong balance sheet, which grew to $134.8 million as at Dec 31, 2020, from $107.7 million in Dec 31, 2019, is positive for mergers and acquisitions (M&A) growth for the company.

Other than AEM’s ongoing offer for CEI, the company also acquired US company Lattice Innovation that provides proprietary technology solutions, which will boost AEM’s competitiveness in system level tasting, he says.

However, Tng has cut his earnings per share (EPS) estimates for FY2021 and FY2022 by 2.1% and 1.0% respectively on expenses assumptions and “reflect the higher number of shares outstanding”.


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“Our Gordon-Growth derived price-to-book value (P/BV) multiple is 4.40 times (previously 6.09 times). Re-rating catalysts are FY21F revenue guidance, which AEM will issue after the completion of the CEI acquisition and new customer wins. Downside risks are delivery delays due to lockdowns/movement restriction extensions and loss of competitiveness by its key customer,” he says.

DBS Group Research analysts Chung Wei Le and Ling Lee Keng have also maintained “buy” on the counter with a higher target price of $5.36 from $5.16 as it sees momentum in the industry remaining strong.

“AEM is in a strategic position to benefit from its key customer and industry uptrend. The stock is currently trading at 10.3 times FY2021 P/E, which is at a 51% discount to its peer average of 21.0 times. We are expecting earnings to grow at a compound annual growth rate (CAGR) of 12.8% from FY2020 to FY2023,” they write.

Furthermore, Chung and Ling see upside for AEM due to a strong surge in demand for chips amid the global chip shortage.

“Qualcomm’s incoming CEO has said that orders for chips that run computers, cars, and many other internet-connected devices are swamping the industry and he expects supplies to improve in 2HFY2021,” they say.

“We believe that the temporary shortage is a signal to fabs and foundries to increase their spending on their semiconductor manufacturing and testing equipment, and this should be positive for AEM,” they add.

On the acquisition of CEI, Chung and Ling estimate CEI to contribute some $1.6 million in earnings to AEM’s FY2021 results assuming the completion of the acquisition will take place in 3QFY2021.

“In our consolidation, we have assumed that all shareholders of CEI tender their shares, and elect the 85/15 Cash/Shares option and 70/30 Cash/Shares option at a ratio of 50-50. In this case, 5.4m new shares will be issued, representing 2.0% of AEM’s outstanding shares in FY2020,” they say.

Beyond the higher target price, Chung and Ling have also lifted their FY2021 and FY2022 earnings estimates by 8% and 22% respectively as they mainly raise their revenue estimates for the company.

“The strong data points and news developments in the industry provides us with confidence to raise our earnings estimates for AEM. The larger increase in FY2022 is mainly due to the full-year contribution from CEI as compared to one quarter’s worth of contribution in FY2021,” they add.


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For Maybank Kim Eng’s Lai Gene Lih, he too, has maintained “buy” with an unchanged target price of $5.05 on AEM.

While 2HFY2020’s earnings stood ahead of the brokerage’s expectations, Lai says his forecasts remain largely unchanged due to the lack of profit guidance for FY2021 from AEM till the completion of the acquisition of CEI.

“Our forecasts do not include contributions from CEI nor Lattice currently. We believe key risk to our FY21 earnings estimate is if there are high-base effects from strong HDMT performance in FY2020,” he writes.

“Contrastingly, we believe upside drivers are: accretive M&A; better-than-expected cloud/ 5G spending momentum in 2HFY2021; and/or if customer Intel benefits from share gains as a result of tight foundry capacity faced by competitors,” he adds.

Shares in AEM closed 4 cents lower or 1.0% down at $3.97 on March 2.