AEM Holdings Ltd
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*At the time of publication

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AEM is a solutions provider for the back-end testing of the semiconductor manufacturing process. It works closely with its key customer Intel to design, engineer, and manufacture the test handlers. AEM then provides field support and post-sales replacements.<br /><br /><br />

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Key Statistics

Dec SGD mn20232024f2025f
Revenue481375405
Net Profit261127
Profit Gth (%)(79.9)(57.7)147.6
PE (X)nm9217.6x1653.8x
Div Yield (%)000
P/BV (X)94.5x93.6x89.8x
Source: Analec ( At the time of publication )

Recent Developments

Our Views

Retains technological superiority in system-level testing. AEM is a pioneer in providing SLT (system-level test) solutions and is around one generation ahead of its competitors. Given its technological superiority, we believe AEM is well positioned to ride on the growing SLT market that has benefitted from the increased
complexity of chips and higher test coverage requirements, alongside the need for advanced heterogeneous packaging.

New technology drives growth in test spend, leading to higher demand for AEM’s offerings in the long term. Notwithstanding near-term volatility, the semiconductor industry is well poised for growth, owing to the push towards digitalisation. McKinsey projects that the semiconductor industry will become a trillion-dollar industry by 2030. Industry megatrends such as artificial intelligence (AI), 5G, and Internet of Things (IoT) will pave the way for growth in test spend, due to higher test volumes and test times. Longer test times would also increase the requirement for AEM’s consumables due to wear and tear.

At the cusp of a multi-year rollout for new customers. In the past few years, AEM announced several customer wins. As at 1H24, AEM was still mainly in the lab verification tool phase but will see a shift into production in 2H24. We believe that AEM is near an inflexion point and foresee its customer diversification strategy yielding more significant returns starting from 1Q25 onwards.

Maintain BUY with higher TP of SGD 1.72 (vs. SGD1.67 previously). Our TP is pegged to 20x FY25F earnings, which is at -0.5SD of the historical mean (vs. previous peg of 18x). Despite changes in revenue recognition timing, the upward revision in 2H24 revenue guidance highlights the strong sales potential driven by long-dated purchase orders (POs). Additionally, AEM's strong traction with new customers further boosts our confidence, prompting us to raise the PE peg. The share price is up 16% post our upgrade to BUY (7 Nov 24) and we see further room for upside. Valuations are still undemanding at 16x revised FY25 estimates, still below -0.5SD of the historical mean.

Risks

Slower ramp at new customers, key customer weakness

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