For Immediate Release . We continue to see. AEM Holdings (SGX:AWX) raised FY20 revenue guidance to SGD480-500m from SGD460-480m. Market Cap (S$ Mn) P/B (x) Current FY20F FY21F Current TTM FY20F AEM HOLDINGS LTD AEM SP SGD 3.47 979 10.1 10.2 9.4 4.9 163% 7.8 6.6 - 76.2 102.8 … However, on 20 October 2020, Intel announced revenue from DCG fell from US$7.1b in 2Q20 to US$5.9b in 3Q20. Importantly, the chart below shows Intel was making losses in 4Q17, 3Q18, 2019 and 1H20 when most of its peers were enjoying a healthy operating margin. CALL US 8am-5pm M-F PST! FCFF is basically a jargon that means cash that is readily distributable to all stakeholders of the firm (debt holders, preferred shareholders, equity shareholders). Investors should note that AEM will need to invest in hiring more senior executives as it seeks to win new customers. With CSPs being the largest client segment in the data center market and for Intel’s data-centric business (accounting for 47% of DCG’s revenue), this development is quite concerning for Intel. Support us and give our facebook page a 'like' or 'share' if you like the articles here! In all likelihood, the rapidly expanding DC market and AEM’s new revenue streams from its multiple acquisitions (MuTest, DB Design, UTAC) will likely prop up AEM’s performance. Meanwhile, Intel prepares for a response in Q1 2021 with its 11th Gen Rocket Lake desktop processors, further intensifying competition in the PC space. AEM HOLDINGS LTD (AWX.SI) General AEM HOLDINGS LTD (AWX.SI) Share Price AEM HOLDINGS LTD (AWX.SI) Target Price AEM HOLDINGS LTD (AWX.SI) Analysts Say AEM HOLDINGS LTD (AWX.SI) Corporate Actions AEM HOLDINGS LTD (AWX.SI) Announcements AEM HOLDINGS LTD (AWX.SI) News AEM HOLDINGS LTD (AWX.SI) Bloggers Say If you enjoy reading the article and find it helpful, please consider subscribing to The Hatch Fund’s newsletter to get the latest notifications and insights! In essence, options granted to Loke Wai San gives him the right to buy additional shares of AEM Holdings at a discounted price. Furthermore, s. , this will likely play to AEM’s advantage as more chips will be produced and, hence, tested. Sri Trang Agro-Industry Share Price Comparable Company Analysis: Selected Global SoC Test Handler Equipment Providers. x 0 x 0 Alert Admin: AEM the volume so low unlikely moving up with such a small quantity eatup. General Technical Service firstname.lastname@example.org. political risks). This was an unexpectedly long article! Should Intel engage in more share buybacks in the coming week/months, it will be a worrying sign for AEM shareholders as Intel is coming under fire at the moment. Customer concentration remains high (85%+ of revenues linked to one of biggest IT companies globally) but new growth opportunities with Huawei and Novoflex could potentially add meaningfully to earnings and customer diversification as of FY20. Teradyne and Cohu are NASDAQ-listed while Advantest is listed on the Tokyo Stock Exchange (TSE), making them much more accessible to global investors (i.e. According to the 2019 Annual Report, Loke Wai San had approximately 3.4 million options outstanding as at 31 December 2019; James Toh had none. Any time from now till then, if prices rise to the S$4.00 range, it will probably be a good time to take profit and wait for the eventual dip. Downgrade DBS OCBC UOB To SELL. OCBC Share Price, Glove/PPE makers: An unclear path to restore market leadership and a seemingly inevitable fall in valuations across the sector/market will continue to keep me on my toes. While markets can be irrational and sentiment-driven in the short-term, they rarely deviate from a company’s true value in the long-term. This was swiftly accompanied by a 1.5 million share disposal (1 million indirectly held) by James Toh Ban Leng, who is the single largest shareholder and a NED/ID of AEM Holdings, and also the Founder and NED of Novo Tellus. a. Verdict: HOLD/Exit at a higher price and buy on the dip (to monitor ARM-based chip’s success). Here, we bring in the concepts of (1) time value of money / opportunity cost, and (2) risks. While I have not followed this market for long, it seems clear that engaging in acquisitions to break new ground is the name of the game. While best efforts are made to ensure the quality of our content, The Hatch Fund will not be liable for any gains/losses arising out of any recommendations made. AEM’s revenue and profitability margins are pegged to analyst consensus estimates for FY2020, FY2021 and FY2022. And without technological advances to get on par, or ahead, of its competitors, Intel might very well find itself in the position of IBM or Nokia in the past. This represents another key event that the market will likely react negatively to in 2021. However, I want to compare apple to apples in the first parse. UG Healthcare Share Price The adoption of ARM-based processors by cloud service providers (CSPs) like Amazon and Google is a worrying sign for Intel, which stands to lose its market leadership. AEM provides strong synergies like field-service Furthermore, should Intel opt to exit its chip manufacturing business and outsource it, this will likely play to AEM’s advantage as more chips will be produced and, hence, tested. Recently, the use of ARM-based CPUs in computers has also been catching on. In July 2020, AMD CEO Lisa Su announced that AMD has successfully surpassed 10% market share in the profitable server chip market. For Aem Holdings, the figure is an impressive 19.9%. AEM Holdings Ltd . Regardless of how rosy MEMS, 5G, IoT or AI trends look, I will prefer to err on the side of caution and continue to monitor developments in this space. Effectively, both AMD and Nvidia are closing in on Intel and starting to chip away at its market share in the DC market. For those who are not familiar with finance/accounting, I attempt to explain these jargons in the table below in a relatable manner: While the 4 charts above seem to suggest that AEM is massively undervalued, this is not an apple-to-apple comparison for a couple of reasons: Hence, we also have to take a look at semiconductor test handler equipment providers that are closer to home (Singapore) to get a better sense of the valuations on these types of companies in the region. On 7 Oct, AEM announced: grant of performance shares to its Executive Chairman (EC) as well as to its Chief Executive Officer (CEO) and; grant of share options to its EC, CEO and other top management. Furthermore, if rumors of Intel outsourcing its chip manufacturing crystallizes, it will also provide a boost to the demand for test handler equipment, further lifting AEM’s performance. AEM Holdings Ltd. Join Date: Sep 6, 2019. On 20 October 2020, Intel announced the sale of its NAND memory and storage business to SK Hynix for US$9 billion. - A 5-year average ROCE of more than 12 percent is a pointer to strong efficiency. Career Opportunities. ), and hence, readily distributable to said stakeholders. AEM Holdings Ltd (AEM SP/AWX.SI) ... key customer’s business strategy, AEM’s new acquisition, and an inclusion of a bull case scenario. AEM Holdings (SGX: AWM) is an equipment solutions provider to largely semiconductor industry with some exposure to 5G as well. Intensifying competition in the PC-centric space (particularly CPU) is likely to push Intel to accelerate the development of 7-nm chips as well as other top-tier and mid-range chips to rival AMD. Isn’t that free money? SINGAPORE - Equipment manufacturer AEM Holdings posted a 65.4 per cent spike in net profit to $15.7 million for the second quarter ended June … Below are the selected comparable companies. Notably, AEM’s GP and EBITDA margins fall below larger peers like Teradyne and Advantest (although it is arguably close to the peer average). Based in Singapore, AEM serves its customers 24/7, across the entire manufacturing lifecycle, using its network of factories and field support locations worldwide. While ARM plays in the CPU market, it is largely different from Intel and AMD — Intel and AMD design and manufacture their chips for direct installation onto a motherboard; On the contrary, ARM designs the silicon and architecture upon which allow chip manufacturers to have more customizations, giving extra flexibility to have chips designed around a product rather than the other way round. All opinions/statement are made based on public information only. For context, Intel has been dominating the personal computing (PC) segment for years, specifically in the central processing unit (CPU) category. In the near term, I remain bullish on AEM’s fundamental performance but will actively monitor the success of the ARM-based processor in DC applications and its response to AMD in the PC space. This is akin to saying Apple Tree X is worth $10 today because it will likely bring in $1 every year for the next 15 years. For a company, this ranges from political risks (e.g. b. Nvidia acquiring Arm for US$40B: Market is moving away from x86 to ARM architecture, posing a huge threat to Intel’s long-term viability in PC business. This will be a good time to buy into AEM. It was long thought that Intel’s Optane business was subsidized by the NAND business as its prices are half of the DRAM memory which it is trying to displace. Additional capital expenditure is likely to be incurred for chip testing, which will benefit AEM in the short-term. AEM’s major customer has been building up its presence in other segments, such as server chips, given the sustained decline in the computing market. The main concerns that stop me from recommending a strong buy include the following: If you care about timing the market (like me), I expect valuations to dip once vaccines finish their final stage of trials and become distributed. I like AEM Holdings since they are very exposed in the semiconductor industry, and also because one of their key customers is Intel, who is very huge as you might know. As semiconductor nodes decrease and heterogeneous packaging becomes mainstream, the need for system level test (SLT) is likely to increase. UTAC and AEM announce plan to jointly develop next generation of CMOS Image Sensor Test Systems and Solution - May 30, 2020. Furthermore, LWS is planning to step down from his Executive Chairman role to become a Non-executive Chairman in 2021. 2205 W 126th Street, Unit A Hawthorne,CA 90250. Intel’s sale of NAND memory business is unlikely to materially affect AEM’s performance as Intel will continue to operate its smaller Optane memory business, which has just reached break-even. We help our customers deliver many of the most successful products in the 5G economy including microprocessors, high speed communications, IOT devices, and solar cells. However, Intel has had several hiccups in recent years — including delays on its 10-nm and 7-nm chips, prioritizing share buybacks over R&D, and the restructuring of its technology team which caused its Chief Engineering Officer to leave the firm — all of which allowed Intel’s long-time rival, AMD, to play catch up. Find the latest AEM (AWX.SI) stock quote, history, news and other vital information to help you with your stock trading and investing. Source of the report is credited at the end of article whenever reference is made. Intel shifts focus to data-centric business but delivers disappointing Q3 2020 results for its data-centric business. Furthermore, Nvidia plans to create products for the server CPU market that combines Nvidia’s AI and GPU offerings with ARM’s offerings. Become a Dealer. AEM insiders have sold a combined 2.7 million shares, which sparked two sell-offs in the last two months. Sponsorship. However, one has to take into account the inflated valuations in the Tech sector and tone down expectations of AEM achieving such valuation multiples in the future. As this turned out to be a very lengthy article, these developments are summarized below: In early September 2020, we caught a glimpse of a rotation out of the tech sector when news of a working vaccine were published. Here, an exit multiple of 7.7x EV/EBITDA in FY2024F and WACC (discount rate / hurdle rate as discussed earlier) of 10.0% are assumed. However, the aim of looking at the APAC companies is to mainly look at the valuation multiples awarded to companies in the backend test equipment manufacturing space in APAC. For the benefit of all readers, DCF is a method of valuing a company based on projections of the future cash flows that it is expected to receive. Videos. In this post, I hope to take a closer look at what has transpired over the last two months and to re-evaluate if AEM is still a sound investment. By focusing on advanced manufacturing solutions for high-volume, high-growth products, AEM has established valuable and long-term partnerships with customers, and maintaining its position at the forefront of manufacturing innovation. And second, a quick discounted cash flow (DCF) analysis to determine what AEM is “actually” worth. While I want to be convinced that these insider transactions may be nothing more than some astute investors timing the market, it is important to remain objective in evaluating if the insiders are exiting because of AEM’s prospects. For the uninitiated, AEM Holdings is a SGX-listed company that provides back-end test equipment to a variety of customers. Leading-edge HDMT technology has helped its core customer achieve 2x savings in chip-testing costs. Mu-TEST is ISO 9001 : 2015 Certified - Feb. 19, 2018 Company ID: 14378. Warranty/Return. social unrest / war / natural disasters), and perhaps even the possibility of bankruptcy / insolvency. AEM’s Executive Chairman Loke Wai San commented, “We are thrilled that the team at DB Design is now part of our AEM family. more money can flow into these shares to support a higher valuation). Thank you! upside from system-level test’s structural growth prospects from new customers/ stronger-than-expected order momentum; and Overall, from a commercial point-of-view, holding on to AEM in the long term may inadvertently turn into a bet on a dying horse if ARM-based chips become successful. In Intel’s 2Q20 earnings announcement, the Company mentioned that its Optane memory business has finally reached break-even, which is an encouraging sign for Intel as Optane will be retained after the NAND memory business sale. Demand from new customers are also likely to ramp up production for AEM in 2020. Without running the risk of going into too much detail, this should give you a basic understanding to roughly follow the analysis below. The market reacted to its revision in a rather muted fashion. Looking at AEM’s historical valuation multiples (chart below) shows us that the company has never traded near these multiples suggested by its peers and will likely remain in this range going forward. As this article is becoming quite lengthy, I will try to keep this section as succinct and informative as possible. However, I am of the opinion that investing in AEM carries oversized downside risks (i.e. We believe these are opportunities to BUY on dips, given, Key risk to our view is if Intel loses more market share than expected, which may result in lower demand for. b. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. What does this mean? Intel is pivoting to its data-centric business as the main growth driver going forward. Intel is planning to sell its NAND memory business to SK Hynix. The NAND business contributed to 7% of Intel’s total revenue and 93% of its Non-Volatile Memory Solutions Group (NSG) revenue in 1H20, generating US$600 million in operating profits in the same period. AEM Holdings - Maybank Kim Eng 2020-11-21: 5G Beneficiary, Sembcorp Industries - UOB Kay Hian 2020-11-24: Well Positioned For Recovery In 2021, Volume Breakout - SGX Stocks with Surging Volume, Price Target with Substantial Upside /Downside Potential, Price & Volume Breakout - Stocks at 3-Month High, Price & Volume Breakout - Stocks at 3-Month Low, System level test is gaining traction, due to rising complexity of chips, and the need to test mission-critical devices reliably. The exact exercise price of the share options are undisclosed, but they range from S$0.196 to S$1.142, which represents a c.220% to c.1700% discount to the current market price. Nvidia’s growth had been largely fueled by the demand for GPUs, the main computing unit used to power accelerated computing systems, such as AIs, autonomous vehicles, super computers, etc.. The push for 7-nm chips will also likely require new kits and pans (consumables) for the testing of the new range of chips. To reduce China exposure ahead of rising trade tensions between China and U.S. AEM will benefit from competition in the PC segment in the short-term as Intel will ramp up chip production to fill the void created by its 7-nm delay and to keep up with AMD (similar game plan to its 10-nm delays). The financial analysis performed here is split into two parts: First, a quick comparable company analysis to see how AEM is performing / valued vis-a-vis its peers. [How to read the table: (1) match exit multiple column with desired discount rate row, (2) intersecting point is the implied share price given those two assumptions –> e.g. Here, the importance of finding comparable companies producing similar products for similar client base is exemplified as margins and growth rates for selected companies deviated greatly from AEM. The benefits of an ARM-based chips include better battery life, greater ease of adding LTE options to hardware than x86 processors, being able to run cooler and, consequently, allowing for thinner/lighter form factors. In the longer term, Intel’s competitiveness in the DC space will likely hinge on whether ARM-based chips can replace x86-based ones (Intel’s / AMD’s chips). By focusing on advanced manufacturing solutions for high-volume, high … For example, in June 2020, an Arm-powered supercomputer, coupled with Nvidia’s Telsa V100 GPUs, took the Supercomputing Top500 performance crown. The sale of Intel’s NAND memory business might bog down AEM’s sales in the near term as there will be less chips to test post-deal, and hence, less consumables will be required (given the Optane is of smaller size). a. AMD catches up to Intel’s lead in the CPU market. Thereafter, I pared down revenues in FY23F and FY24F to ~S$450m levels. If you read till the end, thank you. No multiple expansion — i.e. AEM is a global leader offering application specific intelligent system test and handling solutions for semiconductor and electronics companies serving advanced computing, 5G and AI markets Listed on SGX Market Cap ~S$600m AEM Holdings Limited (AWX.SI) Revenue 2018 : S$262.3m 2019 : S$323.1m 1Q20 : S$146.8m 2020 : Guidance of S$360m - S$380m Risks of near-term share price volatility carries oversized downside risks ( i.e level test ( )... 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