Hot stock: AEM shares down 7.1% at Monday’s open on inventory shortfall
Mia Pei
SHARES of AEM Holdings dropped 7.1 per cent to S$3.16 as at 9.14 am on Monday (Jan 15) with 1.5 million shares transacted, after the semiconductor equipment maker disclosed on Sunday a 5 to 7 per cent shortfall in its last reported inventories.
The last time when the counter closed at this level was on May 23, 2023.
The shortfall was detected during an internal stock-taking exercise, and was due to “human error in transactions” with its enterprise resource planning system, according to the company’s initial investigation.
Last November, AEM stated the inventories for the nine-month period ended September to stand at S$358.6 million. The shortfall of the figure would have “a negative impact” for FY23E reported profits, AEM noted on Sunday.
Citi Research estimated that the 5 to 7 per cent of the inventory shortfall translates into S$14 million to S$20 million on a post-tax basis. “This in turn would represent 46 to 65 per cent of Citi’s current FY2023 profit forecasts.”
DBS Group Research expects AEM to sink deeper into the red with more than 2 per cent trimmed off revenue estimates, if AEM is unable to fulfil any orders due to the shortfall in its inventory.
If AEM is able to partially fulfil its orders, the research house would trim its topline estimates by around 2 per cent, while putting the manufacturer in the red for FY2023 on higher cost of sales.
DBS also expects the news to trigger negative near-term knee-jerk reaction on the counter, and maintains its “hold” call with a target price of S$3.
“Nonetheless, we reiterate our long-term positive view on AEM for its technological superiority in SLT (system level test),” DBS added.
Shares of AEM closed down S$0.30 or 8.8 per cent to S$3.10 on Monday, with 10.9 million shares changing hands, as the 18th most heavily traded counter on the local bourse.
