In addition, AEM's recent strategic partnership with ASE Technology opens the door to potential new clients, while AEM's own new key customer other than Intel is seen to add to its revenue for FY2026 to FY2028.
Another new customer, in the memory space, could also contribute in FY2027 onwards, the analyst says.
Tng, noting that AEM's plant in Penang is now running at full capacity, has raised his FY2027 revenue by 6.7% and FY2028's by 11.5%.
He is also pencilling net profit margin improving by 1.2-3.7% pts over FY2026-FY2028, leading to 14.2-49.7% increase in his EPS forecasts.
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For the coming 1QFY2026, Tng expects AEM to report earnings of $12.7 million, which will be 3.8x higher y-o-y, on the back of a 49% jump in revenue to $127.9 million.
Now, given that his revised EPS forecast is seen to grow at 83% between FY2026 to FY2028, Tng believes that AEM can trade on par with its peers’ average of 41x 2027 earnings, up from his previous valuation multiple of 27.3x.
His revised target price of $10.15, based on 41x FY2027 earnings, which is roughly in line with 1 sd above 42x, which is the average P/E accorded to AEM in its current earnings upcycle of FY2024 to FY2026.
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Key re-rating catalysts include key customer taking earlier delivery of equipment orders and new customers accelerating equipment purchase orders.
On the other hand, downside risks include further delays and/or cancellation of customers’ orders, and slower global economic growth reducing customer demand for AEM’s contract manufacturing subsidiary. Also, AEM is facing a lawsuit from a competitor, says Tng.
AEM shares gained 12.05% to trade at $6.79 as at 2.23 pm. It is up 290.23% year to date.
