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Excerpts from DBS report
Analysts: Wei Le CHUNG & Lee Keng LING
• 3Q20 net profit above expectations, increased 77.4% y-o-y to S$24.3m
• Management raised FY20F sales guidance by 4% to S$500-520m • Maintain BUY with a higher TP of S$5.16 |
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Investment Thesis:
Undemanding valuations for a fundamentally strong company. AEM is in a strategic position to benefit from its key customer and industry uptrend.
It is trading at 9.2x FY21F PE, which is undemanding to its peer average of 19.9x.
Semiconductor industry momentum remains strong. Industry associations are forecasting an accelerated growth for semiconductors in 2021.
The US semiconductor equipment billings continued to increase 40.4% y-o-y in September.
Mission-critical applications to drive longer test times and system-level tests. The complexity and shrinking nodes used in mission-critical applications such as 5G, EV, and AI, are driving longer test times and require system-level tests to ensure compatibility and interconnection between components.
We maintain our valuation peg at 13.7x FY21F earnings, which is at a discount to its international peer market cap-weighted average of c.19.9x. |
| Raise FY20F/21 earnings by 4/4% on strong 3Q20 results and higher revenue guidance. Management has a track record of beating its sales guidance in its previous years and we think this year is no different. We are raising our FY20F revenue by 4% to S$530.4m, which is above management’s guidance on a strong set of 3Q20 results. We are also raising our FY21F revenue by 4% to S$101.5m on a better-thanexpected FY20F performance." -- DBS report |
Where we differ: We are more optimistic on AEM’s earnings and the pick-up in momentum in the industry.
Key Risks to Our View: Single-customer concentration risk, escalation of geopolitical events, protraction of the COVID-19 pandemic, and FX risk.
Full report here
