• Given that at the start of 2026, AEM Holdings traded at the $1.70 level, it must come as a shock to some investors that the latest analyst report has a target price of $10.15. • Even if AEM made a sprint to $6 last week, a CGS report with a $10.15 target price still won't fail to raise eyebrows. • Well, though not in the forefront of the AI boom, AEM is nonetheless a key beneficiary, as it provides cutting-edge testing solutions for chips. • As chips become more complex and heterogeneous, the challenges in testing them rise dramatically, enabling AEM to move to a position of being a critical gatekeeper of chip reliability. Read excerpts of CGS report below ..... |
Excerpts from CGS International report
Analyst: William Tng, CFA
■ We revise our FY26-28F earnings expectations to reflect the start of a new earnings upcycle for AEM, driven by a more diversified customer base.
■ Reiterate Add on its new earnings upcycle. |
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| FY26-28F earnings upcycle begins … |
AEM Holdings’ key customer Intel Corp (INTC US; NR, CP: US$66.78) reported its 1Q26 results on 23 Apr 2026.
Our US partner, Raymond James, noted that Intel’s data centre and AI (DCAI) business is benefiting from hyperscaler demand leading to data centre CPU scarcity.
 "Vis-à-vis the past when AEM was dependent on one customer, its FY27-28F earnings outlook is now driven by three customers and the strategic partnership with ASE. We believe this more diversified customer base supports our revised FY27-28F earnings expectations."-- William Tng, CFA |
For FY26F, we are optimistic that AEM will achieve the high end of its S$460- 510m guidance issued in its FY25 results announcement on 25 Feb 2026.
The recent strategic partnership with ASE Technology (3771 TT; NR, CP: NT$494.5) opens the door to potential new clients (including hyperscaler clients that typically rely on OSAT providers for their chip packaging and testing needs), while a new AI/high-performance computing (HPC) customer is expected to add to FY26-28F revenues.
AEM could also see revenue contribution from a memory customer in FY27F onwards.
We understand that AEM’s plant in Penang is currently operating at full capacity.
As such, we raise our FY27-28F revenue forecasts by a further 6.7-11.5%.
We see net profit margin improving by 1.2-3.7% pts over FY26-28F, leading to 14.2-49.7% increase in our EPS forecasts.
| … driving re-rating to a new S$10.15 TP |
With our revised EPS CAGR (FY26-28F) of 83.0%, we believe AEM can trade on par with its peers’ average of 41x CY27F P/E.
As such, our revised TP is S$10.15, based on 41x our FY27F EPS forecast — roughly in line with 1 s.d. above average P/E of 42x, the market’s valuation of AEM’s current earnings upcycle (FY24-26F; FY24: S$11.4m net profit, FY25: S$17.0m net profit).
1Q26F net profit could quadruple yoy
We expect 1Q26F revenue/net profit of S$127.9m (+49% yoy)/S$12.7m (+286% yoy, +3.8x yoy) when AEM announces its 1Q26F business update (on 13 May 2026).
We previously valued AEM at 27.3x FY27F P/E (average of AEM’s FY17-26F). With our revised earnings expectations driving our 83.0% FY25-28F EPS CAGR, we see AEM rerating to 41x FY27F EPS, in line with its sector average. This lifts our TP to S$10.15. Re-rating catalysts: 1) key customer taking earlier delivery of equipment orders, 2) new customers accelerating equipment purchase orders. Downside risks: further delays and/or cancellation of customers’ orders, and slower global economic growth reducing customer demand for AEM’s contract manufacturing subsidiary. AEM is currently also facing a lawsuit from a competitor. |
→ See also: AEM’s KL Roadshow: Fund Managers Get Clarity on ASE Partnership, Legal News, etc
