CGS-CIMB analyst William Tng has kept “add” on AEM Holdings Ltd, with a higher target price of $5.84 from $5.59 previously, as a result of a lowered price-to-earnings ratio of 14.92 times from 15.30 times.
To this end, Tng has also upped AEM Holdings’ earnings forecast and revenue by 5.8%-6.3%, and now expects 4QFY2021F revenue/net profit to grow 154%/89% y-o-y. Furthermore, he has upped AEM Holdings’ FY2023 earnings per share by 7.2% to 39.1 cents
AEM recorded revenue of $146.2 million in 3QFY2021 ended September, up 9.7% y-o-y from $112.0 million in 2QFY2021, on the back of volume ramp for next generation System Level Testing (SLT) handlers and peripheral tools.
The group has raised FY2021 revenue guidance to between $525 million and $550 million, in light of AEM seeing growth in demand for SLT, due to increased orders in 2HFY2021 from its customers. AEM expects this demand to continue into FY2022, as the group has also received initial orders from its engagement with other customers where there could be meaningful revenue contributions from these efforts in 2HFY2022 and beyond.
See: AEM 3Q21 net profit up 4.3%, raises FY21 revenue guidance
In his report on Nov 10, Tng believes that potential re-rating catalysts are stronger-than-expected orders from AEM’s major customer and earlier-than-expected success in securing orders from other prospective customers.
He also notes that some downside risks are delivery delays due to supply chain challenges and aggressive competitive response from its competitors, although AEM Holdings expects none currently.
In addition, Tng pointed out a customer concentration risk for AEM, with Intel (INTC US, NR) as AEM’s major customer. “Our forecast assumes that AEM will retain its status as the sole supplier for its products to Intel. Management had indicated in its 3QFY2021 business update that it hopes to have meaningful revenue from other customers in 2022,” he says.
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See also: RHB still upbeat on ST Engineering but trims target price by 2.3%
At 4:37pm, shares in AEM Holdings closed at 18 cents higher, or 4.06% higher, at S$4.37.
Photo: AEM
