Company Overview

Stock price 

$1.03

52-week range

64 c - $1.29

Market cap

S$278m

PE (ttm)

9.2

Dividend yield 

1.8%

P/B (ttm)

3.1

Shares outstanding

269 m

Float

83.1%

12m Ave Daily Trading Vol

$9,771,172

Source: Bloomberg (28 June 2019)

Established in 2000, AEM Holdings is one of Singapore’s most established global provider of equipment systems solutions and manufacturing services, with a global market presence spanning Asia, Europe and the United States. It operates through three business segments: Customised Automated Test Solutions, Test and Measurement Solutions, and Micro-Electro-Mechanical Systems (MEMS) Test Solutions.
Link to StockFacts company page.


1. What are some notable developments that AEM’s shareholders can look forward to?

mgt4.18CFO Soh Wai Kong | CEO Chok Yean Hung | Executive chairman Loke Wai San. NextInsight file photo.• We completed some important acquisitions in 2017 and 2018, expanding our capabilities into industrial radio frequency (RF) test solutions, wafer level MEMS testing solutions and vision inspection.

We successfully acquired InspiRain Technologies Pte Ltd (“InspiRain”) in September 2017, as well as Afore Oy and IRIS Solution Pte Ltd in March 2018. Since the completion of these acquisitions, we have seen good progress made and notable contract wins.

• We have also been working towards diversifying our customer base through our AMPS (Asynchronous Modular Parallel Smart platform) initiative. The Group secured a memory manufacturer as a client in 2018 and delivered the first commercial solution in early 2019.

• On the 5G front, we are also working with Huawei Technologies on our optical fibre cable-test solution (developed for qualifying high-performance short reach cabling links) for Huawei’s 5G backhaul network. We have since received acceptance from Huawei for its test equipment and solution and a further sales order for equipment delivery in 2019.

2. What are some of AEM’s main business segments and their growth drivers?

• AEM is primarily engaged in providing customised automated test solutions to both mass volume manufacturers and new technology development laboratories. We are end-to-end partners for our customers in product development from concept to mass production. Our revenue segment and mix are as follows: Kits, Spares & Services (51% of FY2018 sales), Tools/Machine (47%), and Precision Components (2%).

• The commercial success of AEM’s high density modular test (“HDMT”) semiconductor handling platform, released in early 2016, has translated into volume ramp and higher sales for us since 4Q2016 till date. As the installed base of equipment at our customer’s sites increases, we expect continued sales of our kits and pans for the handlers.



3. How much is AEM’s order book for FY2019? What are some notable contract wins?


• We announced sales orders of S$209 million (as at 25 April 2019) for delivery in FY2019 and revenue guidance of S$225-S$250 million in the same year. We expect FY2019 capital expenditure of S$4-S$7 million to support engineering and business development for future customer programmes.

• Some of our recent notable contract wins include securing follow-on projects from our key customer to develop hybrid extensions to the Group’s existing handlers. We expect the new projects to deliver meaningful revenue in 2020 and beyond, building on the continued deployment of AEM’s current test handlers.

• In October 2018, we received an initial order from Huawei Technologies for AEM’s optical fibre cable-test solution, to be developed for qualifying high-performance short reach cabling links for Huawei’s 5G backhaul network. We have since received acceptance from Huawei for its test equipment and solution and a further sales order for equipment delivery in 2019.

4. 5G technology is a new and exciting development in the Technology and Telecommunication space. How is AEM positioned to benefit from this trend?

• On 9 October 2018, we announced that one of the world’s leading telecom companies, Huawei Technologies, has chosen AEM’s test solution developed in collaboration with China Electronics Technology Group Corporation No.23 Research Institute (“CETC23”) for qualifying high-performance short reach cabling links for Huawei’s 5G backhaul network. Read More

• We believe the combined advantage of AEM’s high performance communications cabling test system and our expertise in automating the test environment will enable us to achieve the stringent quality and cost targets for 5G component testing by our customer and its suppliers as well as other customers of the suppliers as 5G network is being rolled out. 

5. We note that AEM is set to deliver its first test solution for Huawei Technologies’ 100Gbps links in 2019. Can investors expect further collaborations with Huawei Technologies?

• AEM has had some preliminary discussions with Huawei to provide other equipment solutions to them. We will update investors if there is a contract win.

6. Semiconductor industry tends to be cyclical. What strategies does AEM have to achieve sustainable growth?

• Our major customer serves multiple major industries and the companies that we acquired recently serve industries such as telecommunication and automobile. We hope the diverse industries we have exposure to will help smoothen the cyclical nature of our business.

• The Group has also made acquisitions in the last 2 years to diversify and grow its capabilities and business. Moving forward, we will continue to seek viable merger and acquisition targets with strong test capabilities which fit our technology and business roadmap.

7. The initial ramp-up phase of high density test handler (HDMT) is near completion as previously guided by management. What are some potential catalysts for a recovery in HDMT sales in your view?

HDMT
• New equipment sales will depend on the timing and pace at which our customer replaces legacy platforms with our equipment, sales seasonality, and market share gains by our customer.

• We expect continued sales of our kits and pans which will go into our existing installed base of equipment at our customer’s sites. The Group has also secured follow-on projects from our key customer to develop hybrid extensions to the Group’s existing handlers. We expect these new projects to deliver meaningful revenue in 2020 and beyond.

8. Besides HDMT, could you elaborate on the Asynchronous Modular Parallel Smart (AMPS) platform? How does it complement AEM’s existing products/services?

• AMPS platform is a Singular Test framework that supports the coexistence of different testers or same testers/different-programmes. It allows for common and configurable test environment for both functional and system level tests, and scalability that enables rapid high parallelism for fast pace environment.

• Other features include modular handler structure with advanced support for active thermal control and intelligent vision inspection customisable to customers’ requirements.

• AEM has been providing system level test solution and platforms to our key customer for more than 17 years. With our know-how and enhanced engineering capabilities, we believed we can further grow our business in both semiconductor and non-semiconductor industries.

9. In this era of constantly-evolving technology, what are some of the key challenges that AEM faces in this industry?

• We view the constantly-evolving technology as opportunities to AEM. Having built a solid business foundation in providing disruptive test and handling solutions for market leaders in the semiconductor and communications industries, we believe we have the opportunity to establish ourselves as a global leader in dramatic test costs reduction for the 5G and data centric future.

• In addition, our acquisitions focus on foreseeable future areas of growth such as wafer level test by MEMS, test and management solutions for IoT, sensors, Artificial Intelligence, cloud and data centres, electric vehicles and 5G devices and infrastructure.

10. What are some of the key risks that AEM currently faces and how does it mitigate or manage these risks?

• While AEM has single customer concentration risk currently, our customer is one of the world’s largest semiconductor companies serving customers in many industries. We have been supplying highly complex and customised equipment to this key customer since 2002 at competitive costs. Therefore, we believe we have a secured relationship with our key customer.

• Separately, the Group had been seeking for growth opportunities and diversification through strategic merger and acquisitions. AEM has also been working towards diversifying its customer base through its AMPS initiative and has secured a memory manufacturer as a client in 2018 with delivery of the first commercial solution in early 2019.



First published on SGX website
10 in 10 – 10 Questions in 10 Minutes with SGX-listed companies 
Designed to be a short read, 10 in 10 provides insights into SGX-listed companies through a series of 10 Q&As with management. Through these Q&As, management will discuss current business objectives, key revenue drivers as well as the industry landscape. Expect to find wide-ranging topics that go beyond usual company financials. This report contains factual commentary from the company’s management and is based on publicly announced information from the company. 
For more, visit sgx.com/research
For company information, visit https://www.aem.com.sg/
Click here for FY2019 1st Quarter Earnings Announcements



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