AEM shares fly to 3-month high on CEI buyout offer

AEM’s share price got another boost this week from its proposed acquisition and delisting of contract manufacturer CEI Limited.

  • AEM Holdings (SGX: AWX) share price hits S$3.93 a share
  • The semiconductor-testing equipment provider wants to privatise CEI Limited (SGX: AVV)
  • AEM is willing to fork out a premium, with its offer price of S$1.15 per CEI share
  • Looking to trade AEM shares? Open an IG account today.

Why are AEM shares still rallying?

Advanced manufacturing solutions firm AEM Holdings - dubbed Singapore’s hottest stock - continued its ascent after proposing to take circuit-board maker CEI Limited private for S$99.7 million in total.

Shares of AEM climbed 4.6% on the day to finish Tuesday (12 January 2021) at S$3.84 per share, marking their strongest close since September 2020. They added another 2.3% to trade at S$3.93 as at 09:09 SGT on Wednesday (13 January 2021).

The robust price gain came on the heels of AEM’s filing on Monday night, when it offered to privatise mainboard-listed CEI at S$1.15 per share.

DBS Group’s research team on Tuesday maintained its ‘buy’ call on AEM and S$5.16 target price, given the stock’s ‘undemanding valuations for a fundamentally strong company’.

The DBS analysts said AEM is in a strategic position to benefit from its key customer, US tech giant Intel, and the semiconductor industry’s forecast accelerated growth in 2021.

Maybank Kim Eng has named AEM as one of its top picks this year. The brokerage anticipates that the increasing chip complexity would be structurally positive for equipment makers and module suppliers such as AEM.

As of Wednesday, all four research teams covering AEM said the stock was a ‘buy’ with an average 12-month target price of S$5.03, according to Bloomberg data.

As it rode tailwinds in the semiconductor sector, AEM’s stock price surged a hefty 68% in 2020.

What are the CEI offer highlights?

AEM’s proposed buyout price is 15% higher than CEI’s last traded price of S$1, and a 20.6% premium to its three-month volume-weighted average price.

CEI shareholders can opt for one of three ways to accept the offer: entirely in cash, in a mix of 85% cash and 15% new AEM shares, or in 70% cash and 30% new AEM shares. The new AEM shares will be issued at S$3.55 each.

Singapore-based AEM, which provides test and handling solutions for semiconductor and electronics companies, believes CEI will be a strategic fit and offer ‘synergistic benefits’. For example, CEI’s printed circuit-board assembly capabilities will help improve AEM’s upstream capabilities and provide customers with supply-chain diversification.

There may also be cross-selling opportunities and more efficient manufacturing processes, the offeror added.

Nonetheless, DBS analysts viewed the proposed acquisition as ‘neutral at best’.

Although the offer price is fair and the deal is expected to increase AEM’s FY2019 earnings per share by 11-13%, the acquisition ‘does not directly complement AEM’s business nor is it very helpful in advancing its technological capabilities’, the DBS analysts wrote.

How to trade AEM with IG

Are you feeling bullish or bearish on AEM Holdings’ stocks?

Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <AEM Holdings> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

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