Brokers’ take: Maybank downgrades AEM to ‘sell’ as chipmakers cut costs
Yong Hui Ting
MAYBANK on Monday (Jan 9) downgraded its “hold” call on semiconductor group AEM to “sell”, amid widespread cost-cutting measures within the industry as the Covid-19 boom fades.
Analysts cut the company’s earnings estimate by 5 per cent and lowered the pegged price-to-earnings ratio from nine times to 8.5 times. The brokerage’s price target for AEM was also reduced to S$3.08, from S$3.43.
Maybank expects the company’s order book to fall in 2023 compared with a robust H1 2022, though the decline could be partly mitigated by orders from new customers in the first half of this year.
Following news of Intel’s cost-cutting measures late last year, the analysts were also worried that the giant chipmaker would negotiate on margins with key suppliers if things deteriorate, thereby affecting AEM’s margins given that Intel is a key customer.
“We believe that the weak outlook from its key customer coupled with a looming recession in Europe and the US signals a lack of positive catalysts going forward and downside risk is evident,” said Maybank in its report.
The group’s short-term headwinds may thus present lower priced entry levels in the near term for investors, added the analysts, who remained confident in AEM’s long-term prospects.
Shares in AEM closed 1.2 per cent or S$0.04 lower at S$3.44 on Monday.
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