KGI has maintained its “outperform” or “add” call for AEM Holdings, a solutions provider for semiconductor and electronics companies, at outperform, with a new target price of $4.24 from $3.61 previously.
The new target price is formed by KGI analyst Kenny Tan’s 14x P/E peg to FY2020F earnings, which he now sees as “feasible”, given the heightened international recognition the company is receiving from the business and investment crowd.
Tan adds that he “[continues] to expect tailwinds for the System Level Test (SLT) industry” due to strong 2QFY20 results from SLT companies Teradyne and Intel, in a July 24 report.
He also highlights that “AEM has taken various steps to improve international branding and competitiveness” over the past month and a half.
For example, recently, there have been many articles published about AEM, the most notable being SEMI, a major international semiconductor trade association. Also, the new CFO of AEM, Leong Sook Han, has a strong background in cross-border experiences, having worked in many countries including the Netherlands.
AEM Holdings has also announced on July 22 that it has acquired a 100% stake in DB Design Group, a California-based supplier of semiconductor-test products and handling systems such as automation fixtures and device kits for a total consideration of US$3.3 million ($4.6 million).
This acquisition will allow AEM to become more competitive, because it will allow them to expand their Serviceable Available market to include the automation fixture and device kit markets, and will give AEM an opportunity to increase their client base through DB Design Group’s existing customers.
On that, Tan has revised AEM Holdings’ profit after tax and minority interests (PATMI) up $0.1 million, to $0.2 million.
However, Tan acknowledges that there lies some risks, including the rising US-China tensions.
Shares in AEM Holdings closed 4.6% down at $3.51 on Friday
