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Hot stock: AEM Holdings up 9.5% after news of higher sales orders

SHARES of AEM Holdings were hotly traded in Thursday's morning session, after the test-handling machine supplier announced that its sales orders received to date have surpassed the amounts announced in previous months.

About 26.26 million shares changed hands by the afternoon break, outstripping the average of 7.33 million shares seen in the past three days and making AEM the top traded counter of the morning. Its share price climbed 9.52 per cent or 10 Singapore cents to S$1.15.

The company said on Thursday that it has received S$209 million worth of sales orders as at April 25, for delivery in fiscal 2019. This is up from S$174 million announced in March and S$140 million announced in February.

It is revising its revenue range upwards to be between S$225 million and S$250 million, and revising its capital expenditure range to be between S$4 million and S$7 million. The increase in capital expenditure is meant to support engineering development for future customer programmes.

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In its FY2018 results released in February, AEM registered a 6.4 per cent increase in profit to S$33.5 million, as revenue improved 18.4 per cent to S$262.3 million. After adjusting for a bonus issue in 2018, earnings per share was 12.27 Singapore cents, compared to 11.96 cents for 2017.

Maybank Kim Eng analyst Lai Gene Lih forecast a revenue of S$193 million for FY2019 in a Feb 26 report, "on the conservative end of the guidance range of S$180 million to S$210 million to factor in risks like order delays or cancellations". He added that upside potential could come from further evidence of continued strong order wins.

AEM had flagged a slowdown in HDMT test handler (TH) sales in previous quarters, and continues to expect lower levels of such sales in FY2019 compared to FY2018. Mr Lai said Maybank Kim Eng still sees potential recovery in HDMT TH sales in FY2020, with the completion of AEM's capacity expansion for a key customer in Israel and the launch of new chips and/or chip platforms.

AEM will deliver its first solutions for Huawei and a memory customer in 2019, and expects production ramp-ups for these two customers and its key customer, a US$235 billion market cap chipmaker. Maybank Kim Eng remained positive on the shares, reiterating "buy" with 18 per cent upside to its target price of S$1.24 over the next 12 months.

"We believe stronger-than-expected orders present upside potential to our earnings estimates, as we have not factored in the contributions of Huawei and the hybrid solutions project that AEM is ramping up production for its key customer in 2020," Mr Lai wrote. "Conversely, we see downside risks to earnings from limited FY2020 (estimated) visibility."

Other tech counters also gained in Thursday's trading, with Hi-P International up 3.3 per cent or five Singapore cents to S$1.55 on 5.4 million shares. UMS picked up 3.47 per cent or 2.5 Singapore cents to S$0.745 on a volume of 5.5 million, while Valuetronics gained 1.5 Singapore cents or 2.19 per cent to S$0.70 in 2.78 million shares.