SINGAPORE (Apr 26): AEM Holdings, the manufacturer of equipment for semiconductor back-end processing, on Thursday morning announced it was raising its FY19E revenue guidance to $225-250 million from $180-210 million.
See: AEM up 9.5% as it revises FY19 revenue range upwards
AEM has also raised FY19E capex guidance to $4-7 million from $3-5 million to support future customer programmes.
“We believe this is an indicator of traction with customers,” says Maybank Kim Eng analyst Lai Gene Lih in a Thursday report.
Maybank is raising AEM’s FY19E revenue by 23% to $236 million.
“We understand that increased orders were primarily from its main customer, a US$260 billion ($354.4 billion) market-cap chipmaker, which contributes around 90% of revenue,” adds Lai.
Meanwhile, Maybank expects to take a small impact from the ceasing 5G modem development by a customer.
Recently, AEM’s main customer announced it is ceasing the development of 5G modems, which was initially expected to be found in consumer devices in 2020.
“We understand that a portion of AEM’s HDMT test-handlers are used to test the customer’s current generation of modems,” says Lai.
There is the possibility that dwindling modem volumes may create slack capacity, which could temper HDMT equipment orders in 2020E.
Following the exit, the customer will now increase its focus on the development of 5G infrastructure and data centre solutions.
As these are sophisticated chips which require more testing than modems, AEM could stand a chance of winning the contracts given its track record.
“Hence, we lower FY20E revenue/earnings by 3%/8%,” adds the analyst.
Maybank is raising FY19E EPS by 47% to factor in higher guided revenue but lowering FY20E revenue/earnings by 3%/8% due to its main customer’s decision to cease development of its 5G modems.
As at 4.40pm, shares in AEM are down 2 cents at $1.14 or 11.4 times FY19E earnings.
