As AEM's offer for CEI turns unconditional, different dividend policies flagged

The Edge Singapore
The Edge Singapore3/31/2021 11:10 AM GMT+08  • 2 min read
As AEM's offer for CEI turns unconditional, different dividend policies flagged
The offer, which has turned unconditional, is open until April 26.
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As of March 26, AEM Holdings, which is in the midst of taking over CEI, controls 68.59% of the latter. The offer, which has turned unconditional, is open until April 26.

CEI shareholders are given a few choices in how they want to accept the offer. First, they can take an all-cash offer of $1.15 per share.

Or, they can choose a mix of cash and AEM shares. Two combinations are available. The first is an 85/15 mix of 97.75 cents in cash and 0.0486 new AEM share; or, they can choose the 70/30 option of 80.5 cents cash and 0.0972 new AEM share.

While the two companies are both within the wider electronics manufacturing sector, they have rather different profiles.

CEI is a contract manufacturer that provides manufacturing services for printed circuit board assembly, complete box-build assembly, equipment design and manufacturing and cable harness assembly.


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CEI’s earnings trend over the past few years indicated a drop from $10.8 million in FY2015 to as low as $6.5 million in FY2017 before recovering slightly to $7.5 million and $7.2 million for its FY2018 and FY2019 respectively. In the same period, its annual turnover has remained rangebound within $130.3 million and $140.3 million.

However, CEI has maintained a relatively generous dividend payout, with special dividends the norm rather than the exception.
Its effective average dividend yield, calculated using average price in the past few years had ranged between 6.65% to 13.84% per year for FY2016 - FY2020. CEI has no fixed dividend policy.

In contrast, AEM provides a wide range of comprehensive semiconductor and electronics test solutions.

It enjoyed rapid earnings growth over the past few years, with its bottomline up 85% to $97.6 million for FY2020 from FY2019.

Now, similar to many fast-growing technology companies, AEM is more restrained in its dividend payout, preferring, instead, to set aside more resources to fund growth – as it is now doing with this CEI deal. Its current dividend policy is to pay not less than 25% of its earnings.

For FY2018 and FY2019, its average yield was 3.01% and 4.21% respectively. For FY2020, it plans to pay a final dividend of 4 cents for FY2020, which is on top of the interim dividend of 5 cents per share already paid, giving a total of 9 cents for the year.

Based on March 30 closing price of $4.20, is a yield of just over 2%.

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