SINGAPORE (April 25): Maybank Kim Eng says AEM’s four-year joint R&D effort with a key US-listed client is paying off.
AEM is the manufacturer of equipment and precision components for the semiconductor, solar, smart card and other industries.
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The group has begun volume production for its patented High Density Modular Test (HDMT) handler in 2H16. This resulted from its partnership with the client which is one of the world’s largest semiconductor manufacturers with more than US$170 billion ($237 billion) market cap.
As the sole supplier of the test handler, AEM’s order book surged about four-fold in six months to $152 million as at April 15. Against this backdrop, management has guided 9M17 ended Sept revenue and operating profit of $142 million and $17.5 million, and a dividend payout of not less than 25%.
Conventional handlers like AEM are set up for one test environment and are costly and time-consuming to reconfigure for other tests.
To improve efficiency, industry leader Intel is adopting the HDMT platform, which can achieve 2x cost reduction due to its ability to simultaneously support different test stages for multiple heterogenous test environments.
IT research firm Gartner projects that the number of connected devices will quadruple to 20.8 billion units by 2020, spurred by the proliferation of 5G network and IoT applications.
“The rising needs for mission critical chips from automotive, healthcare, logistics, telecom and other industries, as well as safety issues would also place greater emphasis on testing to ensure chip reliability,” says Maybank analyst Teh Kwong Yew in an unrated report for retail investors published today.
As its key client accounts for roughly 80% of group sales, AEM’s fortunes are closely tied to the client’s business performance as well as capital investment plans, says Teh.
However, the analyst warns that rapid technological advancement could also render its HDMT handler obsolete and threaten sales, given the group’s equipment segment, comprising test handlers and related consumables, contributed 92% of FY16 revenue.
AEM shares are up 31 cents at $1.88.
