Hot stock: AEM hits 4-year low after Q1 earnings miss

SHARES of mainboard-listed AEM Holdings fell as much as 14.7 per cent in early trading on Thursday (May 9) after the group posted an 85 per cent drop in net profit for its first quarter ended March.

Its counter tumbled to a four-year low of S$1.98, down S$0.34 as at 9.15 am. The last time its shares closed near this level was on Apr 15, 2020. It finished 12.9 per cent or S$0.30 lower at S$2.02.

On Wednesday, AEM, which provides advanced chip testing solutions, posted an 85 per cent fall in net profit to S$2.4 million for the first quarter, from S$15.6 million in the same period a year ago.

This came as revenue declined 38.3 per cent to S$94.2 million from S$152.7 million over the same period last year. The company noted that the semiconductor industry is still undergoing a prolonged cyclical downturn.

AEM’s contract manufacturing revenue was adversely impacted by the slower-than-expected recovery of its key customer and a buildup of inventory in the life science and industrial sectors. However, the group expects its two recent contract wins to grow revenue in FY2025 to “triple-digit millions” – five times FY2023 levels.

Although AEM’s topline numbers were consistent with DBS Group Research’s estimates, earnings were a miss. It believes the steep decline in test and automation equipment sales could be due to low utilisation rates of test equipment that key customer Intel had pulled in during FY2022.

“We are of the view that AEM remains highly exposed to the PC market via Intel and therefore do not expect a radical positive shift in outlook for FY2024,” the research team said.