SINGAPORE (Apr 26): CIMB says 1Q18 results of AEM, the manufacturer of semiconductor test handlers, came in below its expectations due to higher expenses from its three recent acquisitions.
CIMB is adjusting upwards our other operating expenses forecasts for FY18 to reflect the M&A-related professional fees of $0.5 million incurred in 1Q18.
Meanwhile, the research house believes staff costs in FY18 will be higher than forecast previously as AEM is looking to hire more senior engineering talent as well as expenses to develop next-generation solutions.
“Our FY18-20 EPS forecasts are reduced by 6.9-15.9% as we factor in higher staff costs... We maintain our ‘add’ call with a lower target price of $7.24 on higher staff cost assumptions,” says analyst William Tng in a Wednesday report.
1Q18 revenue rose 55.9% y-o-y with the key Equipment Systems segment growing 58.5% y-o-y. However, gross material margin for the quarter was 34.3%, down from 37.4% in 4Q17 but still an improvement from the 28.3% in 1Q17. The decline in margin was due to a one-off discount given to its customer as well as product mix.
AEM is sticking to its guidance for revenue and pre-tax profit of at least $255 million and $42 million, respectively, for FY18. Sales orders received for delivery in FY18 remained at $192 million, an increase of $77 million over its previous guidance on Feb 1.
Tng says management expects seasonality in its sales, with peak quarters in the second and third quarters. Due to shorter order lead times, visibility for the fourth quarter is limited.
Looking ahead, AEM will launch its own test handler known as AMPS (Asynchronous Modular Parallel Smart) platform that can support different testers. AEM will provide this on a customised basis to third-party testing companies or companies that provide testers. AEM hopes to be able to announce some wins by either 2H18 or FY19.
Management expects higher-margin field services and consumables parts of the business to start to grow in late FY18. The company will also continue to seek meaningful acquisitions given its strong cash balance.
As at 1.19pm, shares in AEM are trading at $6.05 or 10.6 times FY18 forecast core earnings.
