Hot stock: AEM falls to near 3-year low after H2 results release
Michelle Zhu
SHARES of AEM fell on Monday (Feb 27) after the semiconductor equipment maker released disappointing results for the second half year ended Dec 31, 2022.
The counter came under sustained selling throughout the day, and traded at an intra-day low of S$3.02 in the late afternoon before ending 33 cents, or 9.8 per cent, lower at S$3.05 on turnover of 6.8 million shares. It closed at a near three-year low.
AEM last Friday reported second half-year earnings of S$44 million, down 30 per cent from S$62.4 million the previous year as revenue dropped 12 per cent on a year-on-year basis.
The company warned that the weakness in H2 may continue in FY2023 due to “a confluence of factors such as a global slowdown… (and) rising interest rates that adversely impact capital expenditure”.
Highlighting “testing times ahead” for AEM, DBS Group Research downgraded its call to “sell” from “hold” after lowering its FY2023 earnings estimates by 42 per cent, and 37 per cent for FY2024.
Its price target was slashed to S$2 from S$3.19 on account of a “sluggish outlook” for the group’s key customer Intel, as well as the group’s much lower-than-expected FY2023 revenue guidance of S$500 million compared to the brokerage’s estimates of S$704 million.
“The outlook for its key customer could continue to be gloomy given weakness in the PC market and consumer electronics alongside the risk of recession, which could slow spending on data centres. Macroeconomic headwinds could also affect Intel’s cash generating abilities to finance its aggressive capital spending plans, which could run the risk of order deferments,” said its analysts on Monday.
They expect AEM to experience further share price weakness in the near term amid a “much poorer outlook”.
Given that Intel contributes about 70 per cent to AEM’s group revenue based on DBS estimates, the analysts also believe such single-customer concentration risk amid key customer weakness will “weigh heavily” on the stock’s valuation multiple compared to its peers.
