AEM Holdings

Turnaround Story

 

Incorporated in 2000 as AEM-Evertech, the company changed its name to AEM in 2007. In 2002, the firm acquired Microcircuit Technology (MCT) , producing BGA / CSP (ball grid array / chip scale packaging). 

The group manufacturing facilities and field engineering services sites are located in: 

  • Singapore 

  • Malaysia - Penang

  • China - Chengdu, Suzhou

  • Finland - Lieto

  • France - Saint-Just Malmont

  • USA - Chandler, Oregon, California

  • Vietnam - Ho Chi Minh

Turning Point

2014 was  the turning point in the company history when AEM disposed of Microcircuit Technology for $14.7M to focus on newly developed system test and handling units for the semiconductor industry. The firm's single most important customer is INTEL. 

Financial

Since receiving her first initial order of $7.2M in 2014; sales to Intel have grown exponentially as the company continue to innovate products for her major customer.

In FY19, revenue grew 23% to $323M and net profit increased 58% to $53M with expenses firmed kept under control.

The spike in spending in 2014 was due to:

$14.7M loss on disposal of MCT, $6.2M write-off of slow moving inventory and couple of capex related expenses. 

Geographical Segment

South East Asia constitute 57% of total sales in 2019, where both Malaysia and Vietnam revenue grew substantially starting from 2016.

North Asia dominated by China which grew significantly in 2018 and shrinking in 2019, likely due to U.S. - China trade war.

Japan appear to be emerging as a possible growth market but this is still uncertain at this juncture.

The Americas also grew substantially, mostly in United States with Costa Rica emerging as a new market in 2019. 

Year of Covid-19

AEM 1Q20 sales grew 178% to $146M with profit quadrupling by 447% to $36M. 

Management revenue guide for FY20 is $360M to $380M and capex of $4M. The group is generally positive as she engages new customers for newly developed products. 

This translates to an average revenue of $71M to $78M per quarter for the rest of the year. 

Opinion

The lower average revenue stream forecast imply weakness moving forward, at least for the short-term. 

Meanwhile analyst estimates for INTEL for 2Q20 is US$1.09 (trended lower) vs US$1.06 in 2Q19. 3Q20 estimate is US$1.13 vs US$1.42 in 3Q19 (WSJ). 

Businesses from new customers will play an important role in determining extend of growth against the Covid-19 headwind.

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