Coming out of 2022, a year of record profit, AEM Holdings stock has been punished for a less-than-optimistic outlook for 2023. DBS, UOB KH and Maybank KE have dismal target prices of $2 and $2.78. $2.66, respectively. However, CGS-CIMB maintained its $3.86 target as it looked to AEM's recovery in 2H2023 and beyond. This aligns with what AEM's CEO, Chandran Nair, said at yesterday's results briefing: 

Chandran quote2.23

Below are excerpts from CGS-CIMB report
Analysts: William Tng, CFA & Izabella Tan

Looking forward to FY24F
■ FY22 revenue of S$870.5m and net profit of S$126.8m were in line with our and Bloomberg consensus full-year expectations.

■ AEM believes that global semiconductor revenue could still reach US$1tr by the early-2030s.

■ Reiterate Add with a TP of S$3.86.
Final dividend was lowered to 3.6 Scts (FY21: 5.0 Scts).

graphic 10.22

Inevitable FY23F slowdown post a record FY22

FY22 revenue of S$870.5m (+53.9% yoy) was in line with our/Bloomberg consensus expectations, at 102%/104% of full-year expectations, and exceeded AEM’s own FY22 revenue guidance of S$820m-850m.

New customers
"AEM thinks that in FY23F, revenue contribution from three new customers could double from that achieved in FY22."

Profit before tax margin decreased to 18.2% in FY22 vs.19.7% in FY21 due to increased cost pressure from supply chain challenges and product mix.

FY22 net profit of S$126.8m (+37.9% yoy) was in line with our/Bloomberg consensus expectations, at 98%/99% of full-year forecasts.

There was a S$2.0m foreign exchange loss in FY22 due to the decline in the US$ versus the S$, which we had previously factored into our full-year forecasts.

AEM also slipped into a net debt position with a net gearing ratio of 3.1%, vs. a net cash position in 1H22.


Initial FY23F revenue guidance of S$500m, cautious on FY23F

AEM cautioned for a weaker FY23F given the global slowdown, rising interest rates, and weaker consumer demand. Initial FY23F revenue guidance of S$500m is 11% above the upper end of our previous S$350m-450m forecast.

AEM thinks that in FY23F, revenue contribution from three new customers could double from that achieved in FY22.

The company is also hopeful that FY24F could see higher production demand from these customers.

We see a semicon recovery in FY24F after a decline in FY23F

We reduce our FY23F revenue forecast by 10.5% (on concerns over the potential slowdown in FY23F), leading to a 19.3% decline in our EPS forecast.

We think AEM will benefit from the semiconductor industry recovery in FY24F and hence, maintain our FY24F net profit forecast though EPS increases by 0.1% as the number of shares declined after AEM’s share buybacks in FY22.

Reiterate Add with unchanged TP of S$3.86   

williamtng4.14William Tng, CFA.We reiterate Add on potential FY24F earnings recovery (FY23F EPS could drop 29.3% yoy).

Our TP is still based on 9.5x P/E, 0.5 s.d. above its 6-year average given its sole supplier status with its major customer.

Re-rating catalysts include stronger-than-expected orders from its major customer and earlier-than-expected success in securing orders from other potential customers.

Downside risks are delivery delays and the loss of its sole supplier status for its major customer, which would negatively affect AEM’s profitability, in our view.

Full report here. 

Share Prices

Counter NameLastChange
AEM Holdings2.820-0.120
Avi-Tech Electronics0.2750.015
Best World2.2700.030
Broadway Ind0.089-
China Sunsine0.460-0.010
Food Empire0.8850.005
Fortress Minerals0.395-0.055
Geo Energy Res0.3000.005
Golden Energy0.9500.010
GSS Energy0.037-0.005
ISDN Holdings0.455-0.015
IX Biopharma0.077-0.006
Jiutian Chemical0.070-
KSH Holdings0.335-
Leader Env0.068-
Medtecs Intl0.1110.007
Meta Health0.022-0.001
Nordic Group0.455-
Oxley Holdings0.141-
REX International0.125-0.012
Sinostar PEC0.160-0.028
Southern Alliance Mining0.595-0.015
Straco Corp.0.450-0.005
Sunpower Group0.3650.005
The Trendlines0.090-0.001
Totm Technologies0.082-0.002
UG Healthcare0.1600.003
Uni-Asia Group1.0200.030
Wilmar Intl4.0900.010
Yangzijiang Shipbldg1.1900.010

NextInsight RSS

rss_2 NextInsight - Latest News

Online Now

We have 641 guests and no members online