AEM Holdings' share price dropped more than 8% following news that it uncovered a shortfall in inventory, potentially hurting its FY2023 numbers due to be reported on or before Feb 29.
In its Jan 14 announcement, the chip tester said that following an internal audit, it discovered a shortfall in inventory that could be between 5 and 7% of $358.6 million as at Sept 30 2023 it had reported.
The shortfall has been attributed to human error in transactions with the ERP system as AEM migrates production from Singapore to its Penang facility.
In its Jan 15 note, DBS Group Research suggests two possible scenarios.
The first, with a higher probability, is that AEM can partially fulfil its orders, and result in a 2% trim in its revenue estimate which could put the company into losses of around $15 million for FY2023 due to higher cost of goods sold calculations.
In the second scenario, which is less likely, AEM would be unable to fulfil any orders arising from the shortfall in inventory and as such, the company could sink deeper into the red with further trims in top lines.
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In either case, DBS expects sentiment towards the stock to be negative.
"Nonetheless, we reiterate our long-term positive view on AEM for its technological superiority in system level test," adds DBS, which is for now keeping its "hold" call and $3 price target.
AEM shares closed the day at $3.10, down 8.82%.
