Maybank Kim Eng’s Lai Gene Lih still remains optimistic on Singapore’s semiconductor industry despite the recent dip in share prices, giving buy ratings to all three stocks under its coverage, namely AEM Holdings, UMS Holdings, and Frencken Group. 

Lai’s target prices for AEM, UMS and Frencken are at $5.77, $2.10 and $2.63 respectively. 

In an Oct 12 report, Lai is of the view that sector fundamentals appear “attractive” and the recent correction in Singapore semicon equipment stocks provides a good opportunity to accumulate on dips. 


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On the Wafer Fab Equipment (WFE) front, he noted that industry association SEMI has raised its 2021-22 outlook. In its 3Q2021 update, SEMI raised its 2021 WFE forecast to about US$90 billion from USD81.7 billion in its prior update. This figure is 44% higher than the same period y-o-y, and SEMI now expects 2022 WFE to be just below US$100 billion ($135.63 billion). 

He also cited sources from Digitimes that says TSMC is also reportedly going to expand its 7 nanometer and 28 nanometer fabs, which may push WFE estimates higher.

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Lai believes that in relation to the Singapore stocks, these developments are beneficial to UMS and Frencken. 

“Separately, we also see Frencken as a beneficiary of ASML’s growth expectations this decade. ASML expects system sales to grow at a CAGR of 11.8-17.8% from 2020 to 2025, and also said that it is building enough capacity for demand scenarios that go beyond the high end of its forecasts,” he writes.

His top pick in the sector is system test provider AEM Holdings, mainly due to new products and customers in FY2022 propelling a new earnings cycle.

Lai sees that Intel’s upcoming Sapphire Rapids and Alder Lake chips are its first mainstream heterogeneously packaged Xeon Scalable and client CPUs respectively. 

This, he believes, requires greater reliance on system-level tests and other test requirements compared to monolithic predecessors. 

Sapphire Rapids is expected to enter production in 1Q2022 and mass produced in 2Q2022, which Lai believes ties in well with the expected ramp of AEM’s new generation of testing products that began in late 3Q21 through 2022. 


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Intel’s Ponte Vecchio GPU is also another product that will likely require significant burn-in and system level test requirements due to the nature of its packaging, which AEM is well equipped to handle. 

He concludes by noting the companies’ valuations, highlighting that UMS and AEM are trading at about 11 times FY2022 P/E following the recent correction.

Lai believes that this is “attractive” since FY2022 is expected to be a growth year, but warns of risks such as margin erosion if costs are inadequately passed through, as well as Covid-19 related production and supply chain disruptions.

An earlier version of this article had put UMS Holdings target price as $1.58. The correct figure should be $2.10