AEM sets FY22 revenue guidance at S$670m to S$720m, anticipates margin compression

AEM Holdings AWX on Tuesday (Jan 11) announced a revenue guidance of between S$670 million and S$720 million for FY2022.

However, the company is anticipating some margin compression in the coming financial year, in view of higher supply chain costs and an increase in research and development spending as it engages customers on new projects.

Meanwhile, capital expenditure is projected to be around S$10 million, said AEM in a regulatory update.

Shares of AEM hit a near 2-week high on Tuesday before the revenue guidance was released and after CGS-CIMB raised its target price. The research team increased its target price to S$7.90 from S$5.84, representing a potential upside of 51.3 per cent from AEM's trading price of S$5.22 at Tuesday's close.

CGS-CIMB's bullish outlook is largely due to Intel's plans to invest US$7.1 billion in the expansion of its test and assembly operations in Malaysia following a global shortage of semiconductors. AEM, which provides advanced chip testing solutions, is a crucial partner of Intel.

CGS-CIMB also raised its FY2022-23 revenue estimates by 12.6 per cent to 17.7 per cent, resulting in a 10.7 per cent to 12.2 per cent rise in its FY2022-23 EPS projections.

In AEM's latest business update for the 9 months ended Sep 30, 2021, the company reported a 33.4 per cent fall in net profit year on year to S$53 million. Revenue declined 22.3 per cent to S$338.5 million in the same period. AEM attributed the drop to its key customer preparing to make a transition to its next-generation test platform in the first half of this year.