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

Felicia Tan
Felicia Tan • 2 min read
CGS-CIMB lifts AEM Holdings' TP to $4.78 on initial success in customer diversification
The higher target price is due to the removal of the valuation discount that was previously pegged to AEM.
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CGS-CIMB Research has kept “add” on AEM Holdings with a higher target price of $4.78 from $4.61 previously.

The positive outlook is due to AEM’s success in diversifying its customer base.

On Aug 31, AEM announced that it had been selected to be the system level test (SLT) solution supplier for an unnamed company.

AEM’s new client is said to be one of the industry’s leading memory integrated device manufacturers.

To analyst William Tng, the announcement is a bright spot for AEM as it wins a non-Intel customer.

AEM’s 26.59%-owned ATECO had also previously announced that it secured orders from two of the largest memory manufacturers in the semiconductor industry for its next-generation memory module handler.

The wins have reaffirmed confidence that AEM has the ability to expand its customer base, notes Tng in an Aug 31 report.

“In its 1HFY2021 results commentary, AEM had guided that the group was in deep technical engagements with 10 out of the top-20 global semiconductor companies, spanning mobility, memory, and high-performance computing, and was hopeful to achieve meaningful revenue from these engagements in FY2022,” he notes.

On this, Tng has removed the valuation discount that was previously pegged to AEM, which explains the lift in target price.

“We now value AEM at 13.9 times (current sector average P/E multiple) FY2022 earnings per share (EPS). Previously we used 13.4 times, a 5.0% discount to the then sector average multiple,” he writes.

In the same report, Tng sees possible upward revisions to AEM’s revenue guidance in the coming months, as well as further new customer wins as potential re-rating catalysts for the stock.

“Downside risks are delivery delays due to lockdowns/movement restriction extensions and aggressive competitive response from its competitors,” he says.

Shares in AEM closed flat at $4.14, or an FY2021 P/B of 3.87 times and a dividend yield of 1.85%.

Photo: AEM

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