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Is AEM Holdings worth buying now?

Analysts believe this is a good time to accumulate AEM stocks, in view of the current share price weakness.

Source: Bloomberg
  • AEM Holdings Ltd (SGX: AWX) share price lowers to S$3.62, after opening the week at S$4.10
  • The semiconductor solutions provider saw first quarter 2021 revenue and net profit fall 45.4% and 63.5% respectively
  • Nevertheless, group revenue was the second highest 1Q result
  • Analysts maintained their ‘buy’ and ‘add’ ratings on the stock, citing the lower buy-in
  • Buy and sell AEM Holdings shares with an IG account

AEM share price: what’s the latest?

AEM Holdings shares have plunged over 13% since the release of its first quarter 2021 financial results.

Shares opened the week at S$4.10 each, and are trading at S$3.62 as at 14:00 SGT on Friday (07 May 2021).

The group’s 1Q 2021 revenue fell 45.4% year-on-year to S$80.2 million, as compared to a record 1Q 2020 revenue of S$146.8 million. Net profit fell 63.5% year-on-year to S$13.2 million, versus a record S$36.1 million in 1Q 2020.

AEM said its balance sheet also remained robust with S$116.1 million of cash and cash equivalents as of 31 March 2021, after various investments and acquisitions made during the quarter.

The inclusion of CEI Limited also further boosted the group’s net asset value per share from S$0.767 as of 31 December 2020 to S$0.939 as of 31 March 2021.

With the acquisition of CEI Limited now completed, the group also issued a new guidance for FY2021’s revenue to be between S$460 million and S$520 million.

It also projected that demand in the first half of 2021 will be lower, with a strong recovery expected from the second half onwards through to 2022.

Read more: Top 5 Singapore stocks to watch in May 2021

What do analysts say about AEM’s 1Q performance?

CIMB analysts kept an ‘add’ rating and price target of S$4.63 on semiconductor solutions provider AEM Holdings Ltd in its latest note. They view AEM’s current ‘share price weakness as a chance to add’ the stock.

However, their forecast does not include the financials of AEM’s newly-acquired subsidiary, CEI Limited.

The analysts said AEM’s first quarter 2021 net profit, which came in at 12.6% of their full-year estimates, were in line with expectations.

They had based this on AEM’s latest guidance for a stronger second half of 2021 versus first half of 2021.

CIMB added that AEM’s FY2021 full-year revenue guidance was also in line with its revenue forecast of S$526.2 million.

Although DBS Group lowered their price target on AEM to S$4.73 from S$5.36 previously, the analysts maintained their ‘buy’ call, citing the stock’s current price-to-earning (P/E) ratio of 11 times being at a ‘44% discount to its peer average (price-to-earnings ratio) of 19.6 times’.

The analysts, however, noted that AEM’s 1Q 2021 net profit came in below their expectations. They believe that 2Q 2021 results are also likely to ‘be muted’.

Finally, they reduced their earnings forecast for FY2021 and FY2022 by 11.6% and 7.1% respectively on the possibility of lower revenue from Intel, AEM’s key customer.

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