CGS International’s William Tng has lowered his target price for AEM Holdings AWX to $1.82 from $1.84 previously and reiterated his “reduce” call, as he thinks that investors will only relook the stock in the 4QFY2024 when prospects for the FY2025 are clearer.
Tng has also reduced his FY2024-FY2026 earnings per share (EPS) estimate by 1.12% after adjusting for AEM’s 1-for-100 bonus share issue announced during its full year results instead of a dividend payout.
Tng’s de-rating catalysts include further delay and/or cancellation of customers orders and slower economic growth, which will reduce customer demand for AEM’s contract manufacturing subsidiary.
AEM recently announced the resignation of current CEO Chandran Nair, who will be replaced by Amy Leong effective July 1.
Leong was born and raised in China, and went to the US when she was 16. She holds a Master’s in Material Science from Stanford University and a Bachelor’s in Chemical Engineering from the University of California at Berkeley as well as over 25 years of semiconductor test and measurement experience, according to AEM’s press release.
Leong has been with FormFactor since October 2012, and before this, she was the VP of Marketing at MicroProbe (acquired by FormFactor) over Apr 2010 to Oct 2012. Prior to joining MicroProbe, Leong worked at Gartner Inc as a Research Director from 2008 to 2010 covering the system-on-chip and microcontroller markets.
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The analyst notes that CGS International hosted AEM for a CEO transition chat with their clients on June 7, in which both incoming and departing CEOs of AEM joined the virtual call.
“We understand AEM’s customers are familiar with Leong given her long career in the semicon industry. In our view, as the new CEO comes on board, AEM will also fill its CFO vacancy,” says Tng.
“As Taiwan’s importance in the AI supply chain grows, we think AEM may need to expand its presence there. We would also like to see Leong work with the AEM board to explore higher standards of investor disclosure, such as target financial models (revenue, margin goals that the company hopes to achieve) and quarterly revenue, margin and EPS guidance.”
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As AEM competes with global players, the CEO and the board should also consider if AEM can attain a better valuation in other financial markets, which would help the company in its M&A strategy, Tng notes.
Tng’s target price for AEM is still based on a 9.6x FY2025 P/E.
Shares in AEM Holdings are trading 3 cents higher or 1.562% up at $1.95.
