Brokers’ take: Maybank upgrades AEM to ‘buy’, lifts target on higher order expectations

MAYBANK Securities upgraded AEM to “buy” from “hold”, as it anticipates a rise in orders for the advanced chip-testing solutions provider for FY2024. 

This came after AEM announced a contract win from a “major fabless provider” of high-performance compute and artificial intelligence semiconductor chips. 

The brokerage raised its target price on the stock to S$2.78 from S$2.13 previously, after lifting AEM’s FY2024 profit after tax and minority interest projections by 50 per cent. 

Maybank analyst Jarick Seet on Wednesday (Apr 3) said he expects AEM’s estimated revenue guidance for FY2024 to be “lifted significantly” as a result of the contract win.  

He anticipated the deal to contribute at least 5 per cent, or S$24 million, of AEM’s estimated revenue for FY2024. 

With AEM slated to commence deliveries for its recent contract in FY2024, the brokerage raised its revenue estimate for FY2024 by 23.5 per cent to S$505.3 million from S$409.1 million. 

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Seet said AEM’s performance in H2 2024 could beat H1, based on optimistic forecasts from other suppliers, and an expected increase in the company’s core customer orders from channel checks. 

He added that AEM could stand to benefit from bullishness in its main customer’s forecast for H2 FY2024. 

“We believe that the worst should be over (for AEM). While the estimated upcoming first quarter of FY2024 should remain weak, we expect a better outlook could potentially rerate the stock upwards, and most negative news would have been priced in,” said Seet. 

Maybank projects AEM to turn in a net dividend yield of 1.6 per cent in FY2024, 2.5 per cent in FY2025 and 3.3 per cent in FY2026. 

Shares of AEM : AWX 0% were trading up S$0.03 or 1.3 per cent at S$2.39 as at the midday trading break on Thursday.