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CGS-CIMB upgrades AEM to ‘add’ with higher TP of $4.11

Felicia Tan
·2-min read

The company is estimated to see a recovery in net profit in FY2025 as demand from its key customer, Intel, returns.

CGS-CIMB Research analyst William Tng has upgraded AEM Holdings Awx to “add” from “reduce” with a higher target price of $4.11 from $2.92 previously.

The upgrade comes as Tng is expecting the company to see a recovery in net profit in FY2025 as demand from its key customer, Intel, returns.

“AEM has taken the opportunity arising from the current lull in demand from its customer to improve operating efficiencies and further reduce its cost structure. In our view, AEM should not require any further capex over FY2024 – FY2025 as the new 365,000 sq ft plant in Penang is sufficient to meet customers’ needs. Its key customer, Intel, has announced further expansion plans in 2023,” Tng writes.

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Earlier in June, Intel had made an announcement about its intention to invest in Poland for a new semiconductor assembly and test facility to meet anticipated demand by 2027. The company was also said to be looking at investing in Costa Rica, where it has test and assembly facilities over the next two years, according to a Reuters report in August. Intel, in December 2021, held a groundbreaking ceremony to mark the construction of its new production facility at Penang as part of its US$7 billion ($9.62 billion) expansion plan in Malaysia.

“This multi-phased expansion project consists of several buildings and is expected to begin production in early-FY2024. We believe Intel could possibly place orders for these facilities by FY2024,” says Tng.

3QFY2023 results

Meanwhile, AEM, which is set to announce its business update for the 3QFY2023 ended Sept 30 on Nov 8, may see a headline net loss of $20.4 million for the quarter. Revenue for the three-month period could decline by 55.1% y-o-y and 24.6% q-o-q to $92.5 million. The analyst also expects AEM to expense off some $26.7 million for the settlement of its arbitration with Advantest.

Shares in AEM closed 6 cents higher or 1.71% up at $3.58 on Oct 19.

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